Question

17. What is the difference between a stock dividend and a stock split? As a stockholder, would you prefer to see your company declare a 100% stock dividend or a two for one stock split? Assume that either action is feasible and explain your reasoning.

Answer 1

Answer:

A stock dividend is a dividend paid to shareholders in the form of additional shares in the company, rather than as cash while a stock split is a corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares.

Explanation:

A stock dividend occurs when the company uses the amount of money that would be paid as a cash to shareholders in the to give them additional shares in the company.

Stock dividends are not taxed until they are sold.

In a 2-for-1 stock split, an additional share is given for each share held by a shareholder. So, if my company had one million shares outstanding before the split, it will have two million shares outstanding after a 2-for-1 split and the resultant effect will affect the stock price stock's price.

I will prefer a two for one stock split divides to boost the liquidity of my company shares which means that the stockholders will have two shares for every share held earlier.

Answer 2

Answer: The answers are provided below.

Explanation:

A stock dividend occurs when the firm uses the money that was meant to be paid to the shareholders as cash dividend to buy additional common shares for them. A stock split occurs when a firm gives two or more new shares to every existing share that an investor holds.

As an investor, I'll consider whether the aim of the company in making a stock split or issuing a stock dividend aligns with my aim of investing in the company. In a case where the aims doesn't align with mine, I'll go and invest in another firm.

A company declaring 100% dividend shows growth and also, as a stakeholder, tax may not be paid by me. Stock split gives room for small investors to invest and it also reduces share price.