Some firms pay stock dividends in addition to or in lieu of cash dividends. Stock dividends are a form of recapitalization and do not affect the assets and liabilities of the firm.
There is a misconception that stock dividends increase the ability of the firm to grow. Many investors believe that stock dividends preserve cash and actually allow the firm to reinvest more for growth. Because of this belief many stocks trade higher after paying a stock dividend. However, stock dividends do not increase the earning power of the company.
In the US, if an investor receives additional shares from a stock dividend (and the investor does not have the option to take the dividend in cash), there is no tax consequence until the investor sells the stock.
Keep INVESTING Simple and Safe (KISS) ****Investment Philosophy, Strategy and various Valuation Methods**** The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.
No comments:
Post a Comment