Stock Dividends Flashcards
Regular cash dividend
May / may not grow but guaranteed to continue into the future
Extra dividend
Will not be repeated indefinitely
Extra prevents market from overacting to negative signal and plummeting stock price
Special dividend
Rare dividend very unlikely to be repeated
Liquidating dividend
Company sells assets and uses cash to pay:
- Bills
- Debts (bondholders)
- Preferred stockholders
- Common stockholders
Market cap
Value of shares of outstanding common stock
Declaration
board of directors announce dividend payout on press release
Ex-dividend
you must buy stock before this date and hold it until this date to receive full dividend
Record date
when you get recognized as a shareholder, one day after ex-dividend
Payment date
Theoretical date shareholder gets dividend
Checks can be cashed on this date or later
Stock dividend
Pay corporate dividend in terms of stock not cash
Does not change market cap because there is no cash inflow / outflow
Why stock dividend?
Nothing transaction, can give something to stockholders when resources are limited
Signals optimism about future by management
Does not hurt ability’s to pay dividends
Stock split
Company issues X% more shares, start with less than you end with
Expand n of shares, so price / value decreases
Why split
give something out when cash constrained
make more shares available to encourage buying (weak)
lower share price to a normal range to encourage buying
small stock dividend
n of shares post split increased by less than 20-25%
large stock dividend
n of shares post split increased by more than 20-25%
