Stock Dividend/Stock Split: Differences
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A. Can you offer any differences between stock dividend and stock split?
b. If you were a stockholder, what would you prefere to see - your company declare a 100% stock dividend or - a 2-for-1 split?
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Solution Summary
The referenced solution explains the difference in terminology and the calculations involved. Even more important are four reasons presented to explain why companies do splits or stock dividends.
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A stock dividend and a stock split are essentially the same thing. It is a difference in terminology and more a matter of the degree to which a company wishes to increase their total number of shares outstanding. In your example, a 100% stock dividend is the same as a 2:1 stock split. In both cases, you will have started with 100 shares, but you end up with 200 shares.
Stock dividends tend to be something less than 2:1, and it may be that fractions are too hard, but percentages are easier. A 20% stock dividend would ...
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