We may be familiar with cash dividends. But did you know that the company can also pay for shares? Is it good or not? Let’s take a look.
Dividend stocks that offer cash returns will allow investors to receive a return in cash, which most companies usually prefer to pay dividends in cash. The stock dividend is when the company will pay the company’s stock dividend to the investors. When it comes to the dividend payment cycle.
Dividend stocks offer returns in stocks because they give the business a higher residual value than cash dividends. It also allows the company to have a large amount of cash left to invest or revolve in the business. It also saves on taxes that have to be paid compared to paying all the dividends in cash.
Stock dividends that offer stock dividends increase the number of shares in the company, but the total value of the company remains unchanged. As a result, the value per share decreases, known as the dilution effect. Even if the value per share decreases, it will not affect investors. because investors will receive more shares from dividend payments, which is sufficient to compensate for such an impact.
Cash dividend stocks have the advantage of allowing investors to receive cash immediately upon the company’s dividend payment date. If investors hold stocks that pay dividends frequently, such as once a quarter, they can increase their cash flow as well.
Cash dividend stocks have the disadvantage of being taxed at 10% of the total dividend received. But you can request this money back later. which has many steps.
Stock dividends that offer stock dividends have the advantage that investors are not taxed at 10%, as if they received a cash dividend and sold the acquired shares on the board. But if investors see the company’s long-term growth potential and then continue to hold shares in the long term, perhaps they will get a return that is worth more than you thought.
Dividend stocks that give a stock in returns have the disadvantage of being unable to generate steady cash flow for investors. If investors want money, they have to sell the shares first. which must see when it can be sold or will it be sold at the price that investors expect?
However, do not forget to check your investment strategy according to your investment goals. Because whether it is a cash dividend or stock dividend, both have advantages.