Difference between a cash dividend and a stock dividend

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Q1. What is the difference between a cash dividend and a stock dividend? If you are a firm's stockholder, do you prefer the cash dividend or the stock dividend? Why? What kinds of investors prefer a low-cash-dividend payout? What kinds of investors prefer a high-cash-dividend payout? Explain.

Q2. There are two ways a firm can distribute the cash to its shareholders. One way is to pay the cash dividend to its shareholders and the other way is stock repurchase. A stock repurchase has a significant tax advantage over a cash dividend. Why? Explain. Besides the tax advantage, what are other advantages for a firm to repurchase its shares? Are there disadvantages of a stock repurchase?

Reference no: EM133160806

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