Cash-And-Stock Dividend

AAA

DEFINITION of 'Cash-And-Stock Dividend'

A corporation distributing earnings to its shareholders as both cash and stock as part of the same dividend. In other words, a corporation declares that as of a certain date all shareholders will receive both a cash payment and additional shares of stock in that corporation at a specific point in the future. The cash portion of the dividend is expressed in cents or dollars per share owned. The stock portion is typically expressed as a percentage of the number of shares owned.

INVESTOPEDIA EXPLAINS 'Cash-And-Stock Dividend'

For example, a shareholder owns 100 shares of XYZ Corporation. The company declares a stock-and-cash dividend of 25 cents per share, plus 10% of the shares owned. For the shareholder, this would result in a $25 cash dividend (25 cents per share multiplied by 100 shares) and 10 additional shares of stock (100 shares owned multiplied by a 10% stock dividend rate).

There are many reasons why a company might choose to issue a cash-and-stock dividend.
Some companies believe that their shareholders respond better to one type of dividend versus another. By using a cash-and-stock dividend, shareholders may feel as if they are getting a better deal than just receiving more of either one by itself.

On a more practical side, stock dividends are typically not taxable to shareholders when received (although many exceptions exist), whereas cash dividends are. By distributing a portion of the dividend in stock, the corporation is potentially helping to minimize the tax effects for shareholders receiving the dividend. Additionally, a partial stock dividend helps a company conserve some of its cash, which can then be utilized to stabilize or grow the company.

VIDEO

RELATED TERMS
  1. Ex-Dividend

    A classification of trading shares when a declared dividend belongs ...
  2. Declaration Date

    1. The date on which the next dividend payment is announced by ...
  3. Payment Date

    The date on which a declared stock dividend is scheduled to be ...
  4. Record Date

    The date established by an issuer of a security for the purpose ...
  5. Dividend

    1. A distribution of a portion of a company's earnings, decided ...
  6. Stock Dividend

    A dividend payment made in the form of additional shares, rather ...
Related Articles
  1. Investing Basics

    Dissecting Declarations, Ex-Dividends ...

  2. A stock split is a corporate action that increases the number of the corporation's outstanding shares by dividing each share, which in turn diminishes its price.
    Investing Basics

    Understanding Stock Splits

  3. Investing Basics

    How And Why Do Companies Pay Dividends?

  4. Investing Basics

    Dividend Facts You May Not Know

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  3. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  4. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  5. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center