Advantages of Stock Dividend
There are many advantages both to the shareholders and to the company. Some of the important ones are listed as under:
(1) To Share Holders: (a) Tax benefit –At present there is no tax on dividend received.
(b) Policy of paying fixed dividend per share and its continuation even after declaration of stock dividend will increase total cash dividend of the shareholders in future.
(2) To Company: (a) Conservation of cash for meeting profitable investment opportunities.
(b) Cash deficiency and restrictions imposed by lenders to pay cash dividend.
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