Stocks back to the company
A cash dividend is what companies with stocks use to share the profits with its shareholders. These are the funds which were not utilized in reinvestment within the corporation. On the other hand, a periodic share repurchase is not widely used although it gives the shareholders a chance to sell their stocks back to the company at a set price above that of the market when the offer was made. The second option is more desirable due to tax breaks and cash dividends are not as regular or as a high in value.
A stock dividend is another option in which companies give out additional shares to their shareholders based on a fraction of the stock. Cash dividends a preferable to this since markets usually go down by a percentage of the released stock dividends therefore making the value of the 20 shares I had before the dividend the same as the 21 after the release. There was no gain and you have to wait for the market to recover from the increase before you can make a profit from selling the new stocks.
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