Contrast the differences between a stock dividend and a stock split
- Contrast the differences between a stock dividend and a stock split.
- Imagine that you are a stockholder in a company. Determine whether you would prefer to see the company that you researched declare a 100% stock dividend or declare a two-for-one split. Provide support for your answer with one real-world example of your preference
Respond:
would prefer to see the company declare a two-for-one split rather than a 100% stock dividend. This can make the shares seem more affordable, even though the company’s underlying value has not changed. It can also increase the stock’s liquidity. When a stock splits, it can also result in a share price increase—even though there may be a decrease immediately after the stock split.
For example, Tesla’s stock price today is $869.74 a share. The company is moving forward with a 3-for-1 stock split after the close of trading on Aug 24. Shareholders of record on Aug 17 will receive a stock dividend of two extra shares for every one share they currently own. What that meant is that for every one share a shareholder has at $869.74, they will have three shares at $290 each.
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