Cash Dividend
Sometimes companies declare cash dividend to its share holders. Cash Dividend is a dividend given to shareholders in the form of cash. Apart fromcapital gains it is another form of revenue for an investor. Cash dividend is declared on the face value of the share. It is computed by multiplying the number of shares held by a person by the cash dividend rate declared.
For example; Mr. Arjun is holding 1000 shares of “X” company and the company is declared a dividend of 20% on its face value. Face value of the share is Rs. 10/-. In this case Mr. Arjun will receive a dividend of Rs. 2/- on each share (10 x 20% = 2) so total cash dividend of Mr. Arjun is Rs. 2000/- (1000 x 2 = 2000). Below given is a simple formula to find out the total dividend on the number of shares held.
Dividend = (Dividend Rate x Face Value of share) x No. of shares
Stock Dividend
Stock Dividend is a dividend given to shareholders in the form of additional stocks. It works similar to cash dividend, instead of cash, stocks will be issued to share holders. It is computed by multiplying the number of shares held by the percentage of the stock dividend declared.
Stock Dividend = No. of shares held x percentage of the stock dividend declared
Right Issue/ Stock Rights
Right issue is the option given to the existing shareholders of a company to buy additional shares of the company at a price lower than its market price. In other words when the company goes for further issue, it gives the first preference to the employees and the present share holders this is called right issue. Right issue helps in getting the shares at reduced price.