Stock Dividend

1037 WordsJan 28, 20135 Pages
Stock dividend * Definition: * A corporate distribution to shareholders declared out of profits, at the discretion of the directors of the corporation, which is paid in the form of shares of stock, as opposed to money, and increases the number of shares. * A dividend paid as additional shares of stock rather than as cash. If dividends paid are in the form of cash, those dividends are taxable. When a company issues a stock dividend, rather than cash, there usually are not tax consequences until the shares are sold. * Explanation: When a corporation declares a stock dividend, it adds undivided profits, which cannot be used to pay dividends, to the capital invested in the corporation, to reflect the additional shares it is…show more content…
So, if the expectations do not fulfill then the confidence of the investors may go down. Therefore, the share prices may further go down. * There is basically no relation between the performance of a company and stock split. So the companies will waste time if they wait for a stock split. * Effects: A share split will result in all shareholders holding more shares in the company. However, the STAKE in the nominal value of the company per share will remain the same (the share 's portion in the share capital). The nominal value per share will decrease. Each new share will carry the same rights as the pre-reverse-split shares (including voting rights and dividend entitlements). * Preconditions: A stock split requires Shareholder approval at an Annual General Meeting pursuant to the Board 's proposal. The proposal includes a resolution on a change in the articles of association with regards to the highest and lowest number of shares that may be issued. * Dates for stock splits: When dealing with transformations on stock splits, an investor needs to consider 2 dates: Exdate and Record date: * The EXDATE is the date at which the shares are trading at post-split prices. * The RECORD DATE is used by the custodian to establish whom to debit and credit the shares from and to. Depending on the market (country) the dates will be set in different ways. There are two main principles: * Exdate driven markets: In
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