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.
Stock splits are when companies increase the number of stocks available to the market but lower the cost per share thereby welcoming investors who could not participate before. An organization performing a stock split had 1000 shares at $1. 00 each and after the split there were 2000 shares at $0. 50 each. The total price of the stock available for purchase does not change only the number and value of shares changes. It gives people a chance to buy in to a company not previously open to them due to high prices without devaluating the stocks in total.
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