A stock dividend, also known as a "scrip dividend", is a dividend payment made with stock instead of cash. Sometimes when companies are tight on cash, they will declare and pay a stock dividend in lieu of a cash dividend. Most shareholders feel like they are getting something. But are they really? In short, a stock dividend is nothing more than a glorified stock split. At the end of the process, the shareholder has more shares that are worth less. Like a stock split, you can not create value by issuing paper and getting nothing in exchange.
Below are several select companies that recently decided to create real value for their shareholders by raising their cash dividends:
After running these companies through my D4L-PreScreen.xls model, none achieved the necessary NPV of MMA Differential to justify a full evaluation. Though they were short of my target, SSS with a NPV of MMA Differential of $4,971 and MAS had a NPV of MMA Differential of $2,003 could have potential in the future.
Disclosure: No position in any of the aforementioned stocks.
(Photo: Steve Woods)
Related Articles:
Masco (MAS) Increases Qtr. Dividend 2.2% (4.98% yield) and Other Increases
Posted by D4L | Thursday, September 18, 2008 | commentary | 2 comments »________________________________________________________________
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D4L - I know from first hand that MAS is a very solid company. Obviously they are struggling right now because of the housing slump, but should recover nicely in the future (IMHO).
passivefamilyincome: When residential turns around, there will be a lot of companies rejoicing!
Best Wishes,
D4L