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Choice Dividend Issue

A choice dividend issue refers to the process by which a company issues dividends to shareholders, giving them the option to receive the dividend in cash or additional shares of stock. This process involves determining how many shares to issue if shareholders opt for stock instead of cash. The number of shares received is usually based on the market price of the stock at the time of the dividend payment.

Example

If a shareholder is eligible for a $100 cash dividend and opts to receive stock instead, and the company’s stock is trading at $25 per share, the shareholder will receive 4 additional shares as part of the choice dividend issue.

Key points

• A choice dividend issue gives shareholders the option to receive dividends in cash or stock.

• The number of shares issued is based on the market price at the time of payment.

• It allows companies to reward shareholders while preserving cash.

Quick Answers to Curious Questions

The number of shares is calculated by dividing the cash equivalent of the dividend by the current market price of the stock.

Companies offer this option to give shareholders flexibility and to conserve cash while still providing a return on investment.

Yes, shareholders typically have the opportunity to choose their preferred form of dividend for each payment, allowing them to adjust based on their investment strategy.