Sometimes companies will issue a dividend in shares,
and it's called a stock dividend.
So you might get a letter from your broker saying, congratulations.
The company has now paid a stock dividend of 5%.
So you had 100 shares, you now have 105 shares.
And the price per share is $30, so
you've got five new shares.
It's like getting a dividend of $150.
But that's what most people think.
What is the next question you ask your broker?
Let me get this straight.
The company has issued new shares, so that I can be paid a dividend in shares.
And I now have 105 shares,
is that the same as getting $150 in cash?
Now think about it.
The question you would ask your broker, do you see where I'm going with this?
The question you would ask your broker is, wait a minute,
every share holder is getting these share dividends,
it's equity, they can't pay me a stock dividend without paying the other.
So the total number of shares went up by 5%.
So I'm calculating what fraction of the company I own, it's the same!