3.2 Cash and Stock Distributions

Question 1

To have the right to the next dividend payment of a stock, an investor must purchase the stock

Answer 1

At least two days before the record date.

Question 2

Positive characteristics of a dividend reinvestment program

Answer 2

Such a program has the benefit of dollar cost averaging.

Dividend shares are purchased at no commission cost.

Question 3

If a company has a stock split, what occurs?

Answer 3

Shareholders own more shares after the split than before the split

Question 4

Cash dividends

Answer 4

Most dividends declared by a corporate board of directors of a domestic corporation are considered qualifying dividends and are permitted preferential tax treatment.

Question 5

dividend reinvestment programs (DRIPs)

Answer 5

They allow stockholders to reinvest their dividends in additional shares of stock.
They provide for automatic investing.
They provide cost savings to firms and shareholders