Would prefer to see your company if you were the owner declare a 100% stock dividend...
Would prefer to see your company if you were the owner declare a 100% stock dividend or declare a 2-for-1 split. Provide support for your answer with one (1) real-world example of your preference.
Homework Answers
As an investor, I would always prefer to have a 100% stock dividend over a 2 - for- 1 split . The reasons are given below:
- a share split does not give any monetary benefit to an investor as the share capital remains the same and the market price auto corrects according to the split size
- there is no receipt of cash in hand if a share split is introduced
- the price of the share is made small so that more people can invest in the company. This however reduces the confidence of the old investors that the company is not being able to raise money using old book prices.
- a cash dividend is direct motivation to keep up the investment in the company
Ex: Berkshire Hathaway Class A shares have never had a share split and are valued at over $200000 per share whereas its Class B shares went for a stock split and are valued at only $3000 per share.
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Would prefer to see your company if you were the owner declare a
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