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Dividends
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Section 4

Cash Dividend Alternatives

Book Version 3
By Boundless
Boundless Finance
Finance
by Boundless
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7 concepts
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Stock Splits

A stock split increases the number of shares outstanding without changing the market value of the firm.

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Stock Dividends

Stock dividends are when a company gives each shareholder additional stock in lieu of a cash dividend.

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Reverse Splits

Reverse splits are when a company reduces the number of shares outstanding by offering a number of new shares for each old one.

Repurchasing Shares

A share repurchase is when a company buys its own stock from public shareholders, thus reducing the number of shares outstanding.

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Benefits of Repurchasing Shares

Share repurchases are beneficial when the stock is undervalued, management needs to meet a financial metric, or there is a takeover threat.

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Drawbacks of Repurchasing Shares

Share repurchases often give an advantage to insiders and can be used to manipulate financial metrics.

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Dividend Reinvestments

Dividend reinvestment plans (DRIPs) automatically reinvest cash dividends in the stock.

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