Monetary value

Compare a regular cash dividend with a periodic share repurchase. Which has greater appeal to you? Explain. I think I would prefer to have a periodic share repurchase rather than receiving a regular cash dividend. Periodic share repurchase will increase my total number of shares in the company and thus will increase my receivables or dividends. I can accumulate as many shares as I want and when I feel like I want to receive my money, I will have a larger cash dividend to receive. Also, by buying as many shares as I want, I can help the company become bigger by increasing its capital.

Explain a stock dividend and further explain if you would prefer it to a cash dividend. Unlike the cash dividends, stock dividends are payments in the form of additional stock shares much like stock splits. It increases the total number of shares of the stockholder but does not increase the market capitalization. I think I would prefer this over cash dividends because by doing so, I reinvest my money in the company which can be beneficial in the future. What are stock splits and how desirable are they? Stock splits are divisions in the total number of shares which increases the total number of shares but not its monetary value.

For example, 100 shares sold at $100 would total to $10000. 00 (the market capital of the company). By stock splits, we can say, we’ll have a 2-in-1 ratio which means 200 shares sold at $50. The number of shares is increased but its market value is still the same. This is desirable since more buyers and sellers are interested in buying shares in the company but I think more stockholders will only mean that the profit will be divided to more people and thus less cash dividend is received.

References

Dividend. Retrieved Oct. 29, 2007, from Investopedia, A Forbes Media Company website http://www. investopedia. com/terms/d/dividend. asp