Which statement is not true of stock dividends?

Which statement is not true of stock dividends?

• A. They are usually taxable
• B. They are offered voluntarily by companies in order to make their stock more attractive
• C. Their amount and frequency are determined directly by shareholders at large
• D. They may be discontinued or reduced at any time

Answer: (C)

Stock dividends are extra shares issued to existing shareholders instead of cash, and the decision about how many new shares to issue and when to issue them is made by the company’s board of directors as part of its capital policy. Shareholders do not set the amount or timing through a vote or by agreement at large. The board can declare a stock dividend, adjust it, or discontinue it as business conditions change, which is why the notion that the amount and frequency are determined directly by shareholders isn’t accurate. The other statements reflect common features: companies may use stock dividends to make shares more attractive and the policy can be reduced or stopped if needed.

Stock dividends are extra shares issued to existing shareholders instead of cash, and the decision about how many new shares to issue and when to issue them is made by the company’s board of directors as part of its capital policy. Shareholders do not set the amount or timing through a vote or by agreement at large. The board can declare a stock dividend, adjust it, or discontinue it as business conditions change, which is why the notion that the amount and frequency are determined directly by shareholders isn’t accurate. The other statements reflect common features: companies may use stock dividends to make shares more attractive and the policy can be reduced or stopped if needed.