A dividend is a portion of the company’s earrings that is distributed to shareholders. Therefore, companies that issue stock will usually suggest payments to shareholders on a quarterly or annual basis. Cash, Stock, Property, Scrip, and liquidating are all different types of dividends. Cash dividends are considered the most common dividend. Also, cash dividends are paid for each share of stock people own in a company. However, cash dividends amounts are determined by the board of elections.
A stock dividend is a form of additional shares rather than cash. Many companies pay dividends in stock to avoid paying any taxes until the stock is actually sold. In addition, companies distribute stock dividends to shareholders because the company’s availability of liquid cash is low. Property dividends are alternatives to cash and stock dividends. A property dividend can either include shares of a subsidiary company or physical assets such as inventories that the company holds. Property dividends are usually issued by companies that are having financial issues but still want to reward shareholders for their investments.
A scrip dividend is distributed when a company is having difficulties raising cash. Scrip dividends are similar to receiving a share of stock as a payment from the company but can be in a form of a provisionary note assuring payment of stock at a later time. A liquidating dividend is issued when a company is not meeting expectations. However, by law, a failing company must pay all of its liabilities before any liquidation dividends are distributed.
The board of directors is the corporate body that determines whether dividends are paid to shareholders. I would prefer a cash dividend because it would provide me with direct cash income. Also, cash dividends give me an option of how to using the cash, including reinvesting if the company