Question

Please explain the difference between a cash dividend and a stock dividend when responding to classmates this week.

Answer 1

Difference between cash dividend and stock dividend

Cash dividend is distribution made by the company of its profits to the shareholders in the form of cash . Profits are received by the shareholders in the form of cash . For exampls if the copany is having 100 shares outstanding and it decides to pay $1 per share as dividend then each shareholder will be receiving $1 per share in cash .

On the other hand stock dividend is the one in which company decides to distribute its earnings to the shareholders by way of issuing additional shares . For exmaple if a company decides to distribute 20% stock dividend then each shareholder will receive 1 additional share for every 5 shares held.