How are investors affected by a firm opting to pay out a stock dividend instead of a cash dividend?
Answer:
A stock dividend is treated as a stock split. By giving out more shares to investors, it dilutes the value of each share. If the market price per share stays the same, it is a benefit to the company in not using cash, and a benefit to stockholders in not being directly taxable.
So, stock dividends, in theory, have little or no value. They are mostly psychological.
Showing posts with label What are the effects of stock dividends on investors compared to cash dividends. Show all posts
Showing posts with label What are the effects of stock dividends on investors compared to cash dividends. Show all posts
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