alleryStart learning →What usually happens to the value of each share after a stock dividend is paid?
AIt often declines
BIt always doubles
CIt is unaffected
DIt always trebles
Answer & Solution
Correct answer: A. It often declines
1. Dividends are payments to stockholders from a corporation's profits, and they can be paid in cash or in stock.
2. Stock dividends are payments in the form of more stock, and they may replace or supplement cash dividends.
3. After a stock dividend, more shares have a claim on the same company.
4. Since the company itself is no larger, the value of each share often declines.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 16 "Understanding Financial Management and Securities Markets", section 16.5 Equity Financing_
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