Compare a regular cash dividend with a periodic share ...



Compare a regular cash dividend with a periodic share repurchase. Which has greater appeal to you?

Regular cash dividends are cash payments by a company to its shareholders. When a company makes a profit, some of it is reinvested in the business and some is paid to shareholders as a dividend. The dividend to be paid out to shareholders must be declared by its board of directors and will usually be distributed quarterly. Regular cash dividends are the most common type of cash distribution and because these dividends are considered income, they are taxable in the year they were paid.

Periodic share repurchase is another type of cash dividend; however, it is less common. This plan gives shareholders the option to sell back their shares to the company at a set price, which is higher than market price at the time the repurchase offer is made.

Periodic share repurchase is more desirable to me even though I may have to reduce my holdings. In choosing this periodic share repurchase I am given the option to sell my shares or not. If I do choose to sell my shares back to the company I can do so at a higher than market price. Also with this choice, there could be tax advantages.

2.Explain a stock dividend and further explain if you would prefer it to a cash dividend. 

In the case that a company does not have sufficient cash to reward their shareholders, they will reward them with stock dividends. Stock dividends are not cash dividends; rather they are shares of a company’s stocks. Stock dividend distributions are generally acknowledged in the form of fractions paid per share

Dividends paid in cash are taxable while a stock dividend is not taxed until it is sold. If I was given a choice, I would choose the stock dividend. Once you are paid cash, your money doesn't have the opportunity to grow unless you invest wisely. The stock dividend is a share of the company and can decrease or increase in value over time. You are in control of when you want to cash in. 

3.What are stock splits and how desirable are they?

Stock splits are similar to that of stock dividend and are no more desirable than a stock dividend . When a company divides its shares it is said to be a stock split. A stock split usually have two main consequences: The corporation must change the par value (if any) of the stock. The market value per share will change in proportion to the split. When a company declares a stock split, the price of the stock will decrease, but the number of shares will increase. By reducing the price of the stock, companies try to make their stock more affordable to these investors. This does not sound desirable because stock split has no effect on the value of what shareholders own. This is...

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