Click the link above to respond to the discussion. If you need help with completing discussions please click here for more information. “Distributions to Shareholders” Please respond to the following: * From the e-Activity, contrast the differences between a stock dividend and a stock split. Imagine that you are a stockholder in a company. Determine whether you would prefer to see the company that you researched declare a 100% stock dividend or declare a 2-for-1 split. Provide support for your answer with one (1) real-world example of your preference. * From the scenario, examine the dividend rate that TFC is paying in order to determine if the company should receive a rate adjustment. Suggest whether TFCs dividends should either (1) stay the same; (2) be increased; (3) or go down. Provide a rationale for your response Peer response From the e-Activity, contrast the differences between a stock dividend and a stock split. Imagine that you are a stockholder in a company. Determine whether you would prefer to see the company that you researched declare a 100% stock dividend or declare a 2-for-1 split. Provide support for your answer with one (1) real-world example of your preference. This week DB(s) revolve around stock dividends and stock splits and the feasibility of the two. Thus, essentially, what is asked is whether or not a 2-1 stock split can benefit parties involved or stakeholders. However, the best method of determining this question, is defining the difference between a stock split, and a dividend. Stock split Investopedia, an online database for the collection of financial connotations defines as stock split as, a corporate action in which a company divides its existing shares into multiple shares. Although the number of shares outstanding increases by a specific multiple, the total dollar value of the shares remains the same compared to pre-split amounts, because the split did not add any real value . Stock dividend Additionally, Investopedia defines this element as, A stock dividend is a dividend payment made in the form of additional shares, rather than a cash payout . The company that I researched, Coca Cola, announced in July 2012, that they would be undergoing a 2-1 stock split, Coca-Cola competes in an industry (the Carbonated Soft Drink – CSD, or Non-Alcoholic Beverage NAB) in which it is profitable for a firm to accept the risk of such an endeavor as splitting the shares prices can actually benefit the firm by attracting investors to a brand that has been in existence for over a century. In my opinion, because of the completion in the market place, and Coca-Colas proven track record or, past performance, this endeavor would ultimately mean that more investors would by into the conglomerate. Of course this was safe and beneficial to Coke. However, for a company in a different industry whos past performance or brand does not warrant such an action, this may not even be a consideration. Not only can a split erode the price of stocks, but the firms credibility and image can be severely damaged, as such a split could be viewed as an act of desperation. As stated in the aforementioned a market analysis is needed prior to this type of action taking place. Thus, Cokes actions were appropriate by my analysis.
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