Question

Distributions to Shareholders and Capital Structure Decisions

B7        * From the e-Activity, contrast the differences between a stock dividend and a stock split. Imagine that you are a stockholder in a company. Determine whether you would prefer to see the company that you researched declare a 100% stock dividend or declare a 2-for-1 split. Provide support for your answer with one (1) real-world example of your preference.

B7        * From the scenario, examine the dividend rate that TFC is paying in order to determine if the company should receive a rate adjustment. Suggest whether TFCbs dividends should either (1) stay the same; (2) be increased; (3) or go down. Provide a rationale for your response.

Answer 1

Any stockholder would prefer a 100% stock divided instead of 2 for 1 stock split. Divided is given the end of a quarter or a year which is the income from the share. It does not affect the current value of share and is allotted by companies from the portion of their net income. Whereas 2 for 1 stock split is just a stock split. For example, if you own 1 share of a company worth $100, then after split, you just own 2 shares worth $50 each. So it's neither dividend gain nor capital gain.

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