PARTICIPATING PREFERRED

Fully Participating»Shares equally with the common stock in

any extra dividends

»Distributed proportionally, based on total par values of common and preferred

Partially Participating»Participation is limited

PROPERTY DIVIDENDS

A nonreciprocal transfer of nonmonetary assets between a corporation and its owners.

Assets other than cash Usually securities of other companies Record at fair value of the asset transferred Gain or loss is recognized

LIQUIDATING DIVIDENDS

A return of contributed capital

Not based on earnings; decreases paid-in capital

STOCK DIVIDENDS

A pro-rata nonreciprocal distribution of additional shares of a corporation's stock to its stockholders.

STOCK DIVIDENDS

Why?»Capitalize retained earnings, thus

signaling to the stockholders that a portion of retained earnings is no longer available for future dividends.

»Pacify stockholders without using cash.

»Reduce market price of stock (large stock dividend).

EFFECT OF STOCK DIVIDENDS

Increase number of shares outstanding No change in total Stockholders' Equity,

but Retained Earnings decreases and Contributed Capital increases

No change in par or stated value No change in ownership interest of

stockholders Market price of stock may decrease No change in cash

SMALL STOCK DIVIDEND

Less than 20% or 25% of outstanding shares

Fair market value of the stock issued is transferred from Retained Earnings to Contributed Capital accounts.

LARGE STOCK DIVIDEND

Greater than 25% of outstanding shares

"Split-up effected in the form of a dividend"

Par or stated value of the stock issued is transferred from Retained Earnings to Contributed Capital