Section 4
Cash Dividend Alternatives
By Boundless
A stock split increases the number of shares outstanding without changing the market value of the firm.
Stock dividends are when a company gives each shareholder additional stock in lieu of a cash dividend.
Reverse splits are when a company reduces the number of shares outstanding by offering a number of new shares for each old one.
A share repurchase is when a company buys its own stock from public shareholders, thus reducing the number of shares outstanding.
Share repurchases are beneficial when the stock is undervalued, management needs to meet a financial metric, or there is a takeover threat.
Share repurchases often give an advantage to insiders and can be used to manipulate financial metrics.
Dividend reinvestment plans (DRIPs) automatically reinvest cash dividends in the stock.