No mini-splits on KMR
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•On the Bogleheads web site Pshonore keeps saying KMR and EEQ distrubutions are like something he calls a mini-split. There is no such thing as a mini-split. As a distribution applies to KMR a payout in no way splits, or diminishes the shareholders ownership in the company.
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• A stock split does not change the size of a company, it just breaks it into smaller parts. A KMR distribution from KMP, to KMR shareholders increases the size of KMR by over half a billion dollars per year.
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• There is no such thing as Pshonore’s mini-stock split. When you fractionate a share into parts each piece is less than the whole. To be like a stock split, you would have to degrade, split, destroy, the original share by some amount, devaluing, diminishing, the share, leaving the total market value of the company unchanged. Unlike a split, KMR issues new shares, all of the original shares have the same full value that they had before, because they are not split, and the total market value of the company is increased from the addition.
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•There is nothing mini about a fractional share of a company like Berkshire Hathaway, or 200,000 shares of a lower priced security. For the Investor the concept of a mini-split does not exist. It makes about as much sense as saying that because the quarterly distribution from Microsoft Corporation (MSFT), Coke (KO), or McDonald’s Corporation (MCD) is a small fraction of a dollar, it is a “Mini-dividend!” If the +$5.00 annual dividend paid by KMP to KMR was to be considered mini, what would you call the $0.10 cents, fifty year dividend paid by Berkshire Hathaway?
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• The KMR distribution is in no way like a stock split. Your original shares as shown on NYSE charts, are completely intact, separate and unchanged. Telling people that something has been split implies something has been lost, when really something valuable has been gained.
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• Stock splits and stock dividends, can fracture ownership. The math is the same as cutting up a Pizza pie. In the case of KMR, KMP distributions, new issuance, fully paid up capital shares, nothing is deteriorated, nothing has been split-off from the original shares. They do not reduce or dilute. It is as if they were giving you an extra piece. A KMR stock dividend is all about addition, not subtraction.
