If you have been practicing a dividend investing strategy in the stock market, you’ve probably already knew that a dividend is not always in cash form.
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Dividends are usually given if a company is doing well (able to meet or exceed their target profit). Depending on the company's performance, the amount or form of compensation given to its investors varies.
What Are the Different Types of Stock Dividends?
Cash Dividend
This is the most common form of dividend; investors are paid a certain amount (based on a formula of course) per share. Meaning, if you have around 10,000 shares and it gives a dividend of 0.50 per share, then you have a clean 5,000 amount. However, cash dividends are taxable. Therefore, you will not be receiving the exact amount.
Stock Dividend
Instead of investors being paid in cash, they are paid with stocks. For example, if you have 10,000 shares and the company is giving 20% stock dividend, then you will have a total of 12,000 shares.
Property Dividend
Instead of being paid with cash or stock, investors are paid by other assets held by the company. They can give their investors either their product or stocks from their subsidiaries.
Liquidating Dividend
If a company is giving this kind of dividend, then this is a tell tale sign that the company is having trouble and is in the process of shutting down.
Scrip Dividend
Basically a promissory note stating to pay the investors at a later time.
Below is a sample screenshot of the first 3 types:
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| Cash, Stock, and Property Dividend |
Investing in dividend stocks is one way of earning in the stock market. However, depending on the company's standing, the compensation given to its investors will not be always in cash form.
The bottom line is it is much better to receive something than nothing.
“A penny saved is worth two pennies earned . . . after taxes."
Randy Thurman
- The Affluent Perspective by Ælfræd "Elf Counsel"
