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CASH AND STOCK
DIVIDEND CASH DIVIDEND
Definition: • Cash dividends are payments made by a corporation to its shareholders in the form of cash. Key Points: • Source: Paid out of the company’s profits or retained earnings. • Payment Frequency: Typically, quarterly, but can be annual or semi-annual. • Taxation: Subject to income tax, varying by country and shareholder's tax bracket. • Impact on Shareholder: Provides immediate cash income. • Impact on Company: Reduces the company’s cash reserves. STOCK DIVIDEND
Definition: • Stock dividends involve issuing additional shares to shareholders instead of cash. Key Points: • Source: Paid out of retained earnings, converted into additional shares. • Payment Frequency: Can vary; typically issued annually or periodically. • Taxation: Generally, not taxed until shares are sold. • Impact on Shareholder: Increases the number of shares owned, but no immediate cash benefit. • Impact on Company: Does not reduce cash reserves but dilutes share value (increase in shares outstanding). WHICH DIVIDEND IS BETTER?
Whether cash or stock dividends are "better" depends on the
shareholder's preferences and financial goals: • Cash Dividends are better for those who: • Need immediate income (e.g., retirees or income-focused investors). • Want to reinvest the money elsewhere or use it for personal expenses. • Stock Dividends are better for those who: • Prefer to reinvest the dividends and increase their holdings in the company. • Are looking for long-term growth and compounding, as more shares could lead to higher future returns. THANKYOU
