As can be seen, both dividend options are valued at $100 000. Let's look at the effect on total shareholders' equity:



Cipper Corporation Shareholders' Equity


Before Dividend


Cash Dividend


Stock Dividend



Common Shares


$300 000


$300 000


$300 000



Retained Earnings


120 000


20 000


120 000



Total Equity


$420 000


$320 000


$420 000



Book Value per share (Equity / # shares)


$4.20


$3.20


$3.36


Assume that you owned 800 shares in Cipper Corporation, shown under The Effects of Dividends on Shareholders' Equity on the content page. Calculate the amount you would receive from a cash dividend and from a stock dividend. Which would you prefer? Fully explain why.