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What is the difference between cash dividends and stock dividends?

While cash dividends result in immediate cash payments to shareholders, stock dividends increase the number of shares that investors in a company or fund own. Cash dividends may be preferred among income investors, but will require taxes to be paid.

How does a cash dividend work?

For example, if an investor owns 100 shares of a stock that pays a cash dividend of $0.25 per share, the shareholder would receive an extra $25 from the company. But since cash dividends transfer capital from a company to shareholders, they reduce the amount of money the company has on hand.

What is cash-and-stock dividend?

Cash-and-stock dividend, as its name implies, is when a corporation distributes earnings to its shareholders in both cash and stock as part of the same dividend.

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