Tesla sought the approval of shareholders for stock dividends

Stock dividends has more similarities with stock divisions than by dividend

In submitting the latest 8K with the Security and Exchange Commission (SEC), Tesla, Inc. (Tsla) announced that they planned to ask for approval for shares dividends during the annual shareholder meeting which will be held later this year. If approved by the investor, Tesla will be able to issue additional shares after the final approval by the Board of Directors.

The news sent Tesla’s share price up by 5% in the premetic trade. However, shares dividends substantially differ from cash dividends, and whether they benefit shareholders at all can be debated.

Stock dividends, unlike cash dividends, disbursed the value of each stock such as stock divisions. Stock divisions usually give each investor one or more of the existing shares per share, while the dividend of stocks usually gives a small part of the shareholders of the shares per share they have.

When shares are divided, the market adjusts immediately, changing stock prices so that investors have the same total value, while only have more stocks, each of which is less valuable. However, whether the same thing happened with the stock dividend depends on how efficient the market is.

If the market responds perfectly to changes in supply, he must adjust the appropriate price, making the stock dividend equal to the mini stock split, does not get an actual value for investors, unlike cash dividends.

However, if the market reacts differently to a smaller increase in stock supply than the bigger one (eg., Does not adjust their prices accordingly), then shareholders may be better. It needs to be watched to see whether this stock dividend really provides benefits for investors.

This is in contrast to cash dividends in which companies only provide some of their profits to investors, who are company owners. Tesla’s income continues to grow and in the latest quarterly revenue release, the company beats the income and income adjusted per share (EPS) estimates when they rose by 65% ​​and 217% yoy each.