Understanding Dividends and Repurchases

What are the different types of share dividends?

• Interest dividends

• Cash dividends, stock dividends, property dividends, scrip dividends

• Dividend reinvestment plans

• Bonus shares

How does a cash dividend differ from a stock dividend?

• A cash dividend reduces the number of shares, while a stock dividend increases the cash reserves.

• A cash dividend is a cash payment to shareholders, while a stock dividend is the issuance of additional shares.

• A cash dividend is a form of loan to shareholders, while a stock dividend is a cash payment.

• A cash dividend is only available to preferred shareholders, while a stock dividend is for common shareholders.

What is a property dividend and how is it distributed?

• A property dividend is a non-cash distribution of assets to shareholders.

• A property dividend is a type of stock option for employees.

• A property dividend is a loan given to shareholders.

• A property dividend is a cash payment to shareholders.

What impact does a share repurchase have on a company's stock price?

• A share repurchase decreases the company's stock price.

• A share repurchase generally leads to an increase in the company's stock price.

• A share repurchase has no effect on the company's stock price.

• A share repurchase only affects the company's dividends.

How can share repurchases affect earnings per share (EPS)?

• Share repurchases decrease EPS by increasing the number of outstanding shares.

• Share repurchases have no effect on EPS at all.

• Share repurchases increase EPS by reducing the number of outstanding shares.

• Share repurchases only affect the stock price, not EPS.

What are the tax implications of receiving cash dividends?

• Cash dividends are taxable as income in the year received.

• Cash dividends are taxed at a flat rate of 10%.

• Cash dividends are only taxed if reinvested.

• Cash dividends are tax-free for all individuals.

In what scenarios might a company choose to issue stock dividends?

• To increase debt obligations

• When facing bankruptcy

• When rewarding shareholders, signaling financial health, attracting new investors, or retaining earnings.

• To reduce the number of shareholders

How does a share repurchase program signal to investors?

• A share repurchase program signals confidence in the company's value and future prospects.

• A share repurchase program means the company is planning to expand aggressively.

• A share repurchase program suggests the company is in financial trouble.

• A share repurchase program indicates a lack of investment opportunities.

What are the potential downsides of share repurchases for a company?

• Increased cash reserves

• Potential downsides of share repurchases include reduced cash reserves, negative market signals, increased financial risk if financed by debt, and misallocation of capital.

• Positive market signals

• Lower financial risk due to debt

How do dividends and share repurchases affect shareholder value?

• Dividends only benefit long-term investors, while share repurchases are irrelevant.

• Share repurchases always decrease stock price and shareholder value.

• Dividends are paid in stock rather than cash, reducing immediate returns.

• Dividends provide immediate cash returns, while share repurchases can increase stock price and EPS, both enhancing shareholder value.