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Respond to the following in a minimum of 175 words: Discuss the four types of dividends....

Respond to the following in a minimum of 175 words:

Discuss the four types of dividends. Which of the four is used most often, and why? What may happen to a company’s share price when dividends are announced or paid? Why do you think this is so?

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Answer #1

Four types of dividend are:-

1. Cash dividend - This is the dividend that an organization pays regularly to its shareholders as a certain percentage of paid-up capital. It is paid out of company operating profit or retained profit.

2. Extra dividend - Extra dividend is the special dividend that is paid by the company on special `situations, for example, exceptional performance by the company in a period.

3. Stock Dividend - It is the dividend in which instead of cash, the stock is given. It is paid when there is a shortage of cash, yet the company wants to satisfy its shareholders.

4. Liquidating dividend - It is that dividend which is paid by the company during partial or full liquidation.

The cash dividend is the most common type of dividend paid by an organization because it is easy to provide and shareholders prefer it because it is paid in the form of cash. Also, it gives an indication that the organization is in good shape.

When an organization declares dividend then stock prices increase because investors know that they will get the dividend. But this increase happens till the ex-dividend date because this is the date that is considered to determine the eligible shareholders who will get dividends.

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