Stock Dividend Methods

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Recommended: Why does a firm pay dividends

There are three different methods that companies can use to pay dividend payments to their stock owners. These techniques include stock dividends, stock splits, and reverse stock splits. Businesses use stock dividends, stock splits and reverse splits when handling transactions of a business since they have no monetary effect on one’s investment. In this paper, we will discuss the meaning of stock dividends, stock splits, reverse splits, and effects on per-share calculations, reasons for these procedures, and how they affect the firm and investor of a company.
A stock dividend consists of shares distributed by a corporation to their shareholders periodically. Stock dividends are most commonly used to boost a company’s cash flow and provide dividends to shareholders. For example, if a company has 200,000 outstanding shares and declared a 5 percent stock dividend distribution, they would have 210,000 shares outstanding (Joseph, 2014). A firm and an investor are affected by stock dividends in numerous ways. Because a stock dividend has no cash value, issuing them to stockholders does not...

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