Stock Dividends, Stock Splits and Reverse Splits

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Companies use different methods for paying their stock owners their dividend payments, depending of what outcomes they are looking to achieve. If they are low in liquid cash they might pay with stock dividends or sometimes they don’t pay their dividends at all for certain periods. Some company needing to achieve their amount of share to increase or decrease might choose to do a stock split or reverse stock split, depending on what they are looking to achieve at end results. These decisions sometimes have impacts on the company’s financial statements and their per share calculations. Investors looking at the financial statements review to search for data indicating how, when and why the company has change their stocks numbers, their value or their dividends to determine if their money is best invested in those companies.

Stock dividend is when the company in which the stocks are obtained from pays the stock owners their dividend payments with additional shares instead of a cash payout. This is very similar to a stock split in that it increases the total number of shares while lowering the price of each share and does not change the market. Stock dividend is also called “script dividend”. Some companies use the distribution of stocks dividend when their availability of liquid cash is in short supply or is needed to be reinvested in other projects.

Stock split is a procedure that changes the number of outstanding share by increase or decreasing the number, without changing the company’s market value or the proportionate ownership interest of the existing shareholders. Is a method commonly used to lower the market price of a firm's stock by increasing the number of shares belonging to each shareholder. This procedures is approved by the board of directors of the company, involves issuance of additional shares to already existing stockholders of the company. Before a company announces a stock split, the...
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