What are the different types of dividends corporations may issue?
When should a corporation pay dividends? Do you prefer a stock dividend or a cash dividend? Why? (120 words minimum)
A dividend can be defined as payment to shareholders from a company’s earnings, which can come in the form of cash, stock, or other valuable property. The board of directors is responsible for deciding the amount and schedule of dividend payments to shareholders. Dividends are also separated between preferred shareholders and common shareholders. In most cases, dividend payments are guaranteed for preferred shares and not guaranteed for common shares. The preference between a cash dividend and a stock dividend comes down to the financial health of the company. If a company shows strong growth prospects for the future, a stock dividend may be the more valuable option. However, if the company’s future looks bleak, it would be preferable to receive a cash dividend.