PARTICIPATING PREFERRED l Fully Participating Shares equally with

PARTICIPATING PREFERRED l Fully Participating » Shares equally with the common stock in any extra dividends » Distributed proportionally, based on total par values of common and preferred l Partially Participating » Participation is limited

PROPERTY DIVIDENDS A nonreciprocal transfer of nonmonetary assets between a corporation and its owners. l Assets other than cash l Usually securities of other companies l Record at fair value of the asset transferred l Gain or loss is recognized l

LIQUIDATING DIVIDENDS l. A return of contributed capital l Not based on earnings; decreases paid-in capital

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

STOCK DIVIDENDS l 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 l No change in total Stockholders' Equity, but Retained Earnings decreases and Contributed Capital increases l No change in par or stated value l No change in ownership interest of stockholders l Market price of stock may decrease l No change in cash l

SMALL STOCK DIVIDEND l Less than 20% or 25% of outstanding shares l Fair market value of the stock issued is transferred from Retained Earnings to Contributed Capital accounts.

LARGE STOCK DIVIDEND l Greater than 25% of outstanding shares l "Split-up effected in the form of a dividend" l Par or stated value of the stock issued is transferred from Retained Earnings to Contributed Capital