Question of the Week

Which of the following is not a reason why a company might issue a stock dividend:

a) To show that the company is performing well.
b) To give stockholders a nontaxable distribution.
c) To increase the shares outstanding, while keeping the price per share low enough to attract small investors.
d) All of these are reasons.
e) None of these are reasons.


Answer:

The correct answer is d.

All of these are reasons for a company to issue a stock dividend, remember that this differs from cash dividends. Candidates always get tricked by reading the question too fast and mistaking a stock dividend for a cash dividend.

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