Cash-And-Stock Dividend

Loading the player...

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.

BREAKING DOWN '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.

RELATED TERMS
  1. Dividend

    A distribution of a portion of a company's earnings, decided ...
  2. Cash Dividend

    Money paid to stockholders, normally out of the corporation's ...
  3. Accumulating Shares

    Common stock given to current shareholders of a company in place ...
  4. Stock Dividend

    A dividend payment made in the form of additional shares, rather ...
  5. Homemade Dividends

    A form of investment income that comes from the sale of a portion ...
  6. Dividend Rate

    The total expected dividend payments from an investment, fund ...
Related Articles
  1. Markets

    Which Is Best: Cash Dividend Or Stock Dividend?

    Cash dividends are paid to shareholders when a company decides not to use the money for operations, but instead, transfer economic value to its shareholders.
  2. Investing

    Due Diligence On Dividends

    Understanding dividends and how they work will help you become a more informed and successful investor.
  3. Markets

    How Dividends Affect Stock Prices

    Find out how dividends affect the price of the underlying stock, the role of market psychology and how to predict price changes after dividend declaration.
  4. Investing

    Why Dividends Matter

    Seven words that are music to investors' ears? "The dividend check is in the mail."
  5. Investing

    What are Preference Shares?

    Preference shares, also referred to as preferred shares, are equity shares that give the shareholders certain rights ahead of common shareholders. For instance, when the corporation declares ...
  6. Investing

    How Dividends Work For Investors

    Find out how a company can put its profits directly into your hands.
  7. Managing Wealth

    Dividend Facts You May Not Know

    Discover the issues that complicate these payouts for investors.
  8. Investing

    The 3 Biggest Misconceptions of Dividend Stocks

    To find the best dividend stocks, focus on total return, not yield.
  9. Financial Advisor

    Understanding How Mutual Funds Pay Dividends

    The process by which mutual fund dividends are calculated, distributed and reported is fairly straightforward in most cases. Here's a look.
  10. Investing

    The Truth About Dividends

    Dividends may seem like money for nothing, but they have several implications.
RELATED FAQS
  1. Which is better a cash dividend or a stock dividend?

    The purpose of dividends is to return wealth back to the shareholders of a company. There are two main types of dividends: ... Read Answer >>
  2. What is a dividend?

    When a company makes a profit and decides not to reinvest the profit in the business, it can pay out a portion to each of ... Read Answer >>
  3. How do dividends affect retained earnings?

    Find out how distribution of dividends affects a company's retained earnings, including the difference between cash dividends ... Read Answer >>
  4. Does a stock dividend dilute the price per share as would a forward stock split?

    Every corporation has the same goal in mind: to maximize shareholder wealth. This goal is fulfilled in two different ways, ... Read Answer >>
  5. Are dividends considered an asset?

    Find out why dividends are considered an asset for investors but a liability for the company that issued the stock, and learn ... Read Answer >>
  6. Can dividends be paid out monthly?

    Find out if stocks can pay dividends monthly, and learn about the types of companies most likely to do so and how monthly ... Read Answer >>
Hot Definitions
  1. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  2. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  3. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  4. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  5. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  6. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
Trading Center