Three Things a Stock Can Do
Acc 230 Financial Reporting: Peeking Under the Financial Hood
Axia College of University of Phoenix
Just starting out in investing? There are a few things that a person should know. I am going to cover just three items that everyone who is going to invest should know. There are many, many more, but this is a start. These are three things that a stock can do. You may be able to play the cards right; after checking out about stock dividends, stock splits, and reverse splits.
A stock dividend is a dividend that is paid as stock, instead of cash. When the dividend is paid in stock and not in cash it cannot be taxed (Investor 2008). When a company wants to conserve their usable cash, they will pay their investors stock dividends. To do this a company will recapitalize their earnings and issue new shares. These new shares are usually done in a percentage of the total amount of shares (Financial 2008). This does not change the investment, or ownership amount, that the person receiving the dividends, has in the company. This will bring down the amount that each share is worth because there are more shares. In today’s market, I cannot find anybody that is giving stock dividends. Many companies are cutting their dividends to save money. American Capital Strategies (ACAS) announced they would not pay any more dividends for the rest of 2008. Well, when this happened the stock took a $2 dive from $9.81 to $7.87 in a day (Dividend 2008). In November, there is a company that was doing very well. American River Bankshares (AMRB) gave a 5% stock dividend to all the outstanding shares of common stock of the company (Business 2008). This company did this to raise shareholder value. American River Bankshares has also posted profits of 5.7million. They are making money and are trying to make their stocks “prettier” looking to raise the value. When a company releases a dividend that is greater than 25%, this is considered a...