Stock dividends and stock splits: Split-Div, Inc., has issued quarterly dividends of $0.10 per share each quarter over the last few years. This quarter Split-Div initiated a 2-for-1 stock split. What is the minimum quarterly dividend the board of Split-Div should approve to avoid sending a bad signal to investors?

Question

Quizplus · Accepted Answer

After a 2-for-1 stock split, the number of shares doubles while the total dividend payout remains the same. To avoid sending a bad signal to investors, the board should maintain the same total dividend payout. Therefore, the new quarterly dividend should be $0.05 per share ($0.10 total dividend payout divided by 2 new shares).

Stock Dividends and Stock Splits: Split-Div, Inc