This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Tesla's (NASDAQ: TSLA) 3-for-1 stock split proposal won shareholder approval at the 2022 annual shareholders' meeting this month. Now, the electric vehicle maker is gearing up for its second stock split after close of trading on Aug. 24. Shareholders of record on Aug. 17 will receive a stock dividend of two extra shares for every one share they currently own.

If you've been wondering how stock splits work and what will happen to your Tesla shares, here are three quick items to jot down. 

1. You'll have more Tesla shares after the stock split

A stock split increases the number of shares outstanding, giving investors more shares in their account for every one share they previously owned.

After a stock split, the value of each share will be reduced to a lower price. This makes it easy for more retail investors to get their hands on a whole share of stock, because the stock price appears more affordable. If you're already an investor, your shares will be split into bite-sized pieces, but the total value of your shares will not increase. 

Let's say you have one share of Tesla's stock. On the day of the 3-for-1 stock split, the company will grant you two additional shares. Each share in your portfolio would be valued at one-third the price of the original share. If one Tesla share is trading at $900 before the stock split, you'll have three Tesla shares valued at $300 each after the stock split. As you can see, the total value of your shares is still $900. 

Here's how many shares you will have after the stock split based on the number of shares you have on record as of Aug. 17. All you have to do is look at the number of shares you have now, and multiply the total by three. That's how many shares you'll have after a stock split. 

• 1 share of Tesla stock = 3 shares 
• 2 shares of Tesla stock = 6 shares 
• 3 shares of Tesla stock = 9 shares 
• 4 shares of Tesla stock = 12 shares 
• 5 shares of Tesla stock = 15 shares

2. You won't have to report the stock split itself on your tax return

A stock split doesn't increase a company's market capitalisation or increase the value of your shares. You may have more shares in your account, but the original value of your shares remains the same. Therefore, a stock split in itself is not considered a taxable event. There are no IRS reporting requirements you need to adhere to during tax time. 

3. You may have to pay taxes if you sell your extra Tesla shares

Although a stock split in itself is not taxable, selling stock for a profit after a stock split can lead to taxes. This is the case if you sell stock in a taxable brokerage account. Earning money in the stock market leads to capital gains taxes. You will be taxed at the short-term or long-term capital gains tax rate, depending on how long you had your Tesla stock before selling it. Your brokerage firm will send you the details of your transaction, so you can properly report the sale to the IRS during tax time. 

Stock splits can be exciting and pain-free in the eyes of the investor. You wake up to more shares in your account after a stock split, and you don't have to worry about any tax obligations. But as soon as you decide to sell, you'll need to report your moves to the IRS. Before you make a move after a stock split, pay attention to the impact it will have on your portfolio and taxes, so you won't be surprised later. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 3 things you should know about the Tesla stock split appeared first on The Motley Fool Australia.

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Charlene Rhinehart, CPA has positions in Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Dividend stocks offer one of the most convenient ways to earn extra income while you sleep. All you have to do is select the dividend-paying stocks you want in your portfolio and watch those dividend deposits flow into your account. The best part is that you may qualify for an automatic dividend income increase without doing anything extra on your end. 

Below, we'll dive into a tried-and-true strategy to help you ramp up your dividend income for years to come. 

Start earning dividend income 

If you're ready to jump-start your dividend journey, you'll need to invest in companies that reward shareholders with dividends. Not every company does this, so you'll have to do some quick research to make sure some of the companies on your watch list are dividend payers.  

Here's how it works. When a company earns money, it can do two things: 

• Reinvest the money back into the company 
• Reward shareholders with extra income 

Some companies will do a bit of both. Take Microsoft (NASDAQ: MSFT), for instance. This trillion-dollar tech powerhouse continues to invest in its cloud business, while paying an annual dividend of $2.48 per share (as of June 2022) to shareholders. But if you want to earn your first $1,000 in dividends from Microsoft, you'll need roughly 404 shares of stock. At Microsoft's current share price, you'll need to dole out six figures to make that happen.

That's why you want to identify your goals and risk tolerance, and then research companies that align with that. If your goal is to invest in companies that raise their annual dividends every year, and you want to diversify your portfolio with companies beyond tech, you'll want to direct your attention to a special breed of stocks. We'll discuss that next.   

Unlocking dividend growth opportunities 

Some companies stick to the same annual dividend payment every year. Other companies have a track record of consistently increasing their dividends. These companies may be part of the Dividend Aristocrats or Dividend Kings club if they've been in the game for some time. 

Dividend Aristocrats have proved their commitment to shareholders by delivering dividend increases every year for at least 25 consecutive years. Here are some examples of companies that have made it on the list: 

• Chevron
• Cardinal Health
• Caterpillar 

Then there's an elite group of dividend payers on the list that have paid and increased their base dividend for at least 50 consecutive years. Here's a preview of the Dividend Kings: 

• Procter & Gamble
• Colgate-Palmolive
• Johnson & Johnson

Growing your income while you sleep 

Let's say you invested in a company that has been crowned a Dividend Aristocrat. The company paid an annual dividend of $3.48 per share last year and plans to boost the amount to $3.65 per share this year. That may not seem like a big deal, but it all adds up.

If you have 1,000 shares of the company stock, you would have earned $3,480 last year. The dividend boost this year will bring you to $3,650. That means you earned an extra $170 without moving a muscle.

Imagine getting a dividend bump every year over the next 20 or 30 years. If the company continues to increase the annual dividend, your income will automatically increase, as long as you hang on to the stock.

Investing in dividend growth stocks can set you up for automatic pay raises for the rest of your life. Although past performance does not always guarantee future success, these companies have a proven track record that can help you get started on your journey.

Diversify your portfolio with dividend growth stocks 

Setting up a dividend income growth strategy doesn't mean you should abandon other types of stocks and investments. Dividends can fit into a well-diversified portfolio of assets that align with your goals and risk tolerance.

Start creating your watch list, do your research, and look out for companies that are growing their dividends. Those small dividend increases every year can lead to thousands of extra dollars over the long term. The best part is that you won't have to lift a finger to earn your rewards.   

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post How to increase your dividend income without lifting a finger appeared first on The Motley Fool Australia.

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Charlene Rhinehart, CPA has positions in Caterpillar and Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Johnson & Johnson. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Amazon's (NASDAQ: AMZN) much-anticipated stock split will take place on June 3. Shareholders approved the 20-for-1 stock split at the company's annual meeting on May 25. 

If you're wondering how Amazon's stock split will impact your portfolio, below is a crash course on how stock splits work.

Behind the scenes of Amazon's upcoming stock split 

Stock splits have been taking over headlines in 2022. In March, Amazon joined the tech gang by announcing that its 20-for-1 stock split was approved by the board of directors. The stock shot up after the news, but shares of the tech behemoth tumbled to their 52-week low a few days before the company's 2022 annual shareholders' meeting. 

Amazon's stock has experienced a few bumps and bruises, but it won't impact the stock split. Shareholders gave Amazon the green light to move forward with a stock split at the annual shareholder meeting. All shareholders on record as of May 27 will see 19 additional shares of stock for every one share they own on the big day. If you have two whole shares of Amazon stock in your account by the deadline, you'll receive 38 additional shares after the stock split. 

The stock split will take place on June 3, and the price per share will reflect the split on June 6. This will make it easier for smaller investors to buy shares of Amazon at an affordable price. 

Stock splits won't make you rich overnight

Although stock splits tend to stir up excitement among investors, it's not as glamorous as it sounds. A stock split in itself won't make you rich overnight. It's more of a cosmetic transformation. Every share of stock will be divided into smaller pieces. This gives more people a chance to own whole shares of the stock at a cheaper price.

You can think of a stock split like exchanging a $20 bill for 20 singles. Although you have more dollars in your hand, the value of the money in your possession is still the same.

The stock split will allow investors to buy whole shares of Amazon at a cheaper price. After Amazon's stock split, the four-figure stock price will drop to $115 if the stock is trading at $2,300 before the stock split.

The future of Amazon's share price

It isn't uncommon for a company's stock price to explode after a stock split. However, you can't guarantee that Amazon's stock price will shoot up after the split. 

The best move you can make is to invest in companies based on the underlying business. Go behind the scenes and evaluate the business by asking the following questions:

• Is the company's revenue sustainable? 
• What factors are driving revenue? 
• Are there any threats or weaknesses that can interfere with future growth? 

By answering these questions, you'll be forced to do your research and determine if the company is a good fit for your goals and risk tolerance. A stock split may be a motivator to jump in, but it won't be enough to drive the performance of a company over the long term. 

Selling Amazon stock after the split

If you decide you don't want to hang on to your extra shares after the stock split, you might have to pay taxes. It depends on how long you've held the stock and your taxable income for the year.

For example, if you bought shares of Amazon after the stock split announcement and sold your extra shares after the stock split, you'll be on the hook for short-term capital gain taxes. This is what happens when you sell stock that you've held for a year or less.  

However, if you don't touch your extra shares of stock in your account, you don't have to worry about taxes. A stock split is not considered a taxable event for investors. 

Don't be fooled by stock splits 

This year's stock split hype may tempt you to load up on shares of company stock that weren't even on your radar. A stock split in itself shouldn't be the main reason you buy a stock. You may see a temporary boost in the stock price after the split announcement, but it's not enough to keep investors calm in this volatile market. 

That's not to say you can't get excited when a stock split is coming up. If you see long-term value in a company, there's no shame in celebrating your extra shares received from a stock split. It may be the boost you need to reach your share count goal and execute other strategies in your account that can take you to the next level on your investing journey. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Amazon shareholders approve 20-for-1 stock split. Here's what investors should know appeared first on The Motley Fool Australia.

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Charlene Rhinehart, CPA has positions in Amazon. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Tesla's (NASDAQ: TSLA) stock price shot up 8% on March 28 after the company announced its intentions to pursue a stock split. Nothing is set in stone yet, but many investors are sitting on the edge of their seats trying to figure out their next move. If Tesla's potential stock split is anything like its previous split in August 2020, it could mean a victory for investors. 

Tesla's four-figure share price may be too expensive for some investors right now, and that's where fractional shares may come in. We'll dive into how a stock split works and the power of fractional shares in your portfolio. 

Tesla's stock split intentions

Although full details about Tesla's stock split haven't been disclosed, here's some information that's on the table so far:

• Tesla filed a Form 8-K on March 28. This form is filed with the Securities and Exchange Commission (SEC) to alert investors about major announcements that could impact the company. 
• The electric-car maker plans to ask shareholders for permission to move forward with a stock split at the 2022 Annual Meeting of Stockholders. Last year's meeting took place in October. 
• The stock split would be delivered to shareholders after final board approval. 

Although stock splits tend to stir up a lot of excitement in the marketplace, it's really not a big deal when you look at the full picture. A stock split in itself doesn't make the company more valuable. The intrinsic value of the shares will remain the same. But for investors without huge amounts to invest, a lower per-share price can help them get whole shares if they want.

Fractional shares can help you get a bite of Tesla 

If you're bullish on Tesla, you don't have to wait until the company makes a final decision about its stock split before you load up on shares. You can get a piece of the action now with fractional shares. This provides a convenient way to gain access to your favorite stocks without breaking the bank. 

Tesla is trading around $1,000 per share. If you don't want to dole out $1,000 for a whole share, you can set aside a smaller amount (say, $100) to add Tesla to your portfolio. Fractional shares allow you choose a dollar amount that you feel most comfortable with to gain access to a portion of the company's profits. 

Although fractional shares lower the barrier to entry, you should do your research before buying any stock. Here are some questions to consider before you give Tesla your hard-earned money:

• Does Tesla have the potential to continue its growth streak over the next five to 10 years? 
• Can the company stay ahead of electric vehicle competition? 
• Could Tesla's expenses hinder the company's growth capabilities? 
• What external factors could impact Tesla's performance? 

The impact of buying Tesla before the potential stock split 

While everyone waits to hear more about the split logistics for Tesla's stock, you may be able to make moves now that could position you to have a whole share after the stock split.

Let's say Tesla moves forward with a 2-for-1 stock split. If you're an investor before the cut-off date, you'll end up doubling your shares of Tesla after the stock split. 

Suppose you have a 1/2 fractional share of Tesla in your account. If a 2-for-1 stock split happened, you would have a whole share after the stock split. 

Don't base your buy decision on stock splits

Stock splits can make a company look attractive to many investors, but it's only a cosmetic change for the company's stock. Therefore, you shouldn't base your investment decisions solely on a company's plans to do a stock split.

However, if you've done your research and think Tesla is a buy, it wouldn't hurt to start buying fractional shares. It's a great way to diversify your portfolio and invest in the stock at a dollar amount that works best for your finances. You'll also be positioned to receive extra shares in your account if the shareholders and board approve a stock split. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Should you buy fractional shares of Tesla before the potential stock split? appeared first on The Motley Fool Australia.

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Charlene Rhinehart, CPA owns Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and recommends Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

If you're on a mission to become a better investor, your secret weapon is closer than you think.

Books and teachers are great, but nothing compares to the sage advice that mothers typically dole out. Although some words may have gone in one ear and out the other, you'll look back and be able to unravel some of Mum's lengthy list of do's and don'ts as precious gems to live by today. And believe it or not, it can be extremely helpful when it comes to investing. 

As a tribute to all the mothers (and mother figures) out there, we're going down memory lane to extract Mum's collection of jewels that you can apply on your investing journey.  

1. Don't fall for FOMO 

Mum probably didn't use those exact words, but she may have warned you about FOMO (fear of missing out) somewhere down the line. You may have wanted the latest gadgets, apparel, or look because everyone was raving about it. But carrying that mindset always leaves you on the edge of your seat chasing the next big thing. 

This is true even in the investing world. If you're always hunting for the hottest stock because of FOMO, you may end up being an emotional wreck if things don't go your way. Instead, take Mum's advice and focus on having clear goals and a strategy so you'll never have to worry about missing out on anything. 

2. Don't buy the first thing you see 

If we all just pressed the buy button when an investing opportunity popped up on our radar, we'd most likely be in a ton of trouble in the markets. Luck could work in your favor, but the downside of an investment decision that you're clueless about could leave you sweating bullets at night. 

Do what many mums do: compare and proceed with care. They do their due diligence before they purchase products, performing some form of research and comparison analysis to ensure they are getting the best bang for their buck. So before you purchase your next stock, allow this motherly wisdom to replay in your mind. 

3. Create a shopping list 

Mums hardly ever head to the store without a shopping list.

That shopping list was Mum's version of a watch list. It gives you a point of reference to focus your attention and get familiar with the price movement of assets you are interested in. 

Creating your watch list of stocks can allow your brokerage firm to notify you if there was an increase or decrease in the price of an asset so that you can move accordingly. Most importantly, keeping a list of what you want and tracking the stock activity of a few stocks can help you to be more efficient in the markets. 

4. Think long term 

Mums are often five steps ahead of the game. If Mum ever said no to the candy, piercing, or tattoos, chances are there was a reason behind it. Most often, it was probably just her way of thinking about your future.

Even in the stock market, there will be all types of temptations that come your way — from selling a stock that skyrocketed in value overnight to acquiring the latest penny stock recommendation from your barber. But you have to be able to step back and consider the long-term implications of your investing decisions. You want to think about how your investment decisions can allow you to take advantage of compound interest and maybe even help you to become the millionaire next door. 

5. Be patient 

This may be one of the hardest lessons to digest. Being patient is not as glamorous as instant gratification, but it has the potential to produce sweeter rewards later. 

Mum may have tested our patience when she had presents under the tree that couldn't be unwrapped until Christmas or when you were prompted to wait to take a course in driving. Now, you'll have to relive the wait again as you work to build a portfolio that funds your retirement. 

Patience pays off. While your stocks have the potential to grow in value over time, you can also enjoy a recurring stream of income from stocks that pay dividends. 

Give Mum some credit 

When you think about it, a mother figure's advice can be golden on your investing journey — even if it's not dressed up in the fancy financial lingo investors use today. Mums touch on the basic principles of investing that you'll need to achieve financial success: Do your research, develop goals, and be patient enough to see your long-term vision become reality. 

If you ever start to panic as an investor, just think about this timeless advice to keep you going strong. Mums have survived many unexpected situations and thrived. Chances are, you can achieve your investing goals if you keep these words of wisdom in your back pocket. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 5 ways mums are secret investing geniuses appeared first on The Motley Fool Australia.

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The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.