What Are the Types of Dividend Payouts?
A dividend payout refers to the cash or stocks issued by a company to its
shareholders. Take note that not all types of payouts are in the form of cash.
Some companies choose to issue new stocks, or even in the form of properties.
Here are the differences between these types of dividendpayouts.
CashDividends:-
Most companies who pay dividends issue them in the form of a check or
recently, via electronic transfer. The equivalent value of the cash payout will be
transferred by the company to an individual investor account.
One important aspect to take note of cash dividends is the economic value
transfer. Whenever a company issues cash dividends, there will be a loss in the
price of the stock.
For example, if Verizon issues cash dividends equivalent to 5% of the share
price, then the VZ stocks in NASDAQ will decrease by 5%.
Another aspect to consider is the taxation on the distribution value. Those who
receive cash payouts are obliged to pay tax on the distribution value. This can
further decrease the final value of the stocks.Cash dividends are primarily beneficial for individual investors because it
provides regular passive income aside from the capital appreciation of the stock
holdings.
Stock DIVIDENDS:-
Some companies issue dividend payouts but not in the form of cash but instead
in the form of stocks.If you are interested in this type of dividend payout, you should take note that
stock dividends are issued to company shareholders without prejudice.Stock dividends are usually common stocks. If a company decides to release less
than 25% of its total number of outstanding shares, then the payout is considered
as stock dividends.Meanwhile, the payout is considered as a stock split if the payout is higher than
the outstanding shares.When a company decides to release a 5% stock dividend, it must also increasethe number of shares by 5%. If you own shares of that company, you will receive
1 share for every 20 shares you hold. If you hold 1 million shares, then you can
receive 50,000 additional stocks.But this transaction cannot increase the value of the company. When the share
price of the company is $20, then its value will be $20 million.After the release of the dividend payout in the form of stocks, the value of the
company will stay the same. However, the share price will be lower because of
the economic transfer of value.The beauty of choosing dividend stocks is that you can have a choice. You could
either retain your stocks and put your trust that the company will use the
investment to further boost shareholder value, or you may choose to sell some of
your stocks so you can convert them into cash.
A dividend payout refers to the cash or stocks issued by a company to its
shareholders. Take note that not all types of payouts are in the form of cash.
Some companies choose to issue new stocks, or even in the form of properties.
Here are the differences between these types of dividendpayouts.
CashDividends:-
Most companies who pay dividends issue them in the form of a check or
recently, via electronic transfer. The equivalent value of the cash payout will be
transferred by the company to an individual investor account.
One important aspect to take note of cash dividends is the economic value
transfer. Whenever a company issues cash dividends, there will be a loss in the
price of the stock.
For example, if Verizon issues cash dividends equivalent to 5% of the share
price, then the VZ stocks in NASDAQ will decrease by 5%.
Another aspect to consider is the taxation on the distribution value. Those who
receive cash payouts are obliged to pay tax on the distribution value. This can
further decrease the final value of the stocks.Cash dividends are primarily beneficial for individual investors because it
provides regular passive income aside from the capital appreciation of the stock
holdings.
Stock DIVIDENDS:-
Some companies issue dividend payouts but not in the form of cash but instead
in the form of stocks.If you are interested in this type of dividend payout, you should take note that
stock dividends are issued to company shareholders without prejudice.Stock dividends are usually common stocks. If a company decides to release less
than 25% of its total number of outstanding shares, then the payout is considered
as stock dividends.Meanwhile, the payout is considered as a stock split if the payout is higher than
the outstanding shares.When a company decides to release a 5% stock dividend, it must also increasethe number of shares by 5%. If you own shares of that company, you will receive
1 share for every 20 shares you hold. If you hold 1 million shares, then you can
receive 50,000 additional stocks.But this transaction cannot increase the value of the company. When the share
price of the company is $20, then its value will be $20 million.After the release of the dividend payout in the form of stocks, the value of the
company will stay the same. However, the share price will be lower because of
the economic transfer of value.The beauty of choosing dividend stocks is that you can have a choice. You could
either retain your stocks and put your trust that the company will use the
investment to further boost shareholder value, or you may choose to sell some of
your stocks so you can convert them into cash.
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