Property Dividends

A property dividend is a dividend paid in any other way but cash or with the company’s own stock. A property dividend generally is attributable to its face value in the market. For example, when a corporation outgrows a subsidiary, shareholders might receive assets or shares of that subsidiary. Distributing the stocks or assets of the subsidiary (instead of cash) permit shareholders to benefit directly from the market value of the dividend received.

Special distribution: Companies sometimes make special distributions in many ways such as extra dividends , spin-offs and split-offs.

Extra dividends: Companies could want to distribute an extra dividend to their shareholders on a one-time or infrequent basis. A company could have had a particularly great financial three month period or other reasons for this kind of distribution to exist. The company could use a special distribution before it increases its regular dividends because such distribution is a one-time stand.

Companies will not want increases in their dividends rates if they won’t be able to continue with said increased payments.

Spin-offs: A spin-off is the distribution of shares of a subsidiary company to shareholders. Some companies allocate among their shareholders some or all the shares of a subsidiary company as a spin-off.

For example, when Pepsi Cola Company (stock ticker symbol PEP) wanted to call all their attention in its soft drink and snack food business; it made a spin-off with its restaurant business (Pizza Hut, Kentucky Fried Chicken, and Taco Bell chains). These food businesses now negotiate under the name of Tricon Global with the stock ticker symbol YUM. Pepsi shareholders received each one a YUM share for each 10 Pepsi shares that they owned as of the record date. Pepsi?s stock market prices dropped almost to YUMs share value distributed on spin-off day.

Shareholders have the option of keeping or selling the additional shares they receive. In many cases, spin-off company shares surpass in performance those related companies because the new independent companies can expand and develop themselves in different directions in comparison to their parent companies.

Split-offs: A split-off is the exchange of a parent company’s stock for a pro rata share of the stock of a subsidiary company. Split-offs which differ from spin-offs do not occur frequently. In a split-off, shareholders are offered the option to keep their existing company shares or exchange them for shares in the split-off company.

For example, AT&T in August 10,2001 finished the split-off of Liberty Media Corporation. Then, AT&T redeemed each outstanding share class A and B of Liberty Media Tracking stock for one share of class A and B of the common stock also from the Liberty Media Corp. In a split-off a share exchange is produced, and in a spin-off shareholders receive additional shares in another company.  Although shareholders obviously benefit at receiving cash dividends or properties, they too benefit when earnings are not distributed but used as reinvestments for the same company. This technique increases the value of the share and therefore, also of its stock.