Dividends are payments that investors receive from a company in relation to the purchase of stock. Stock dividends are a type of dividend in which the company issues extra stocks at no charge to investors, based on the investors' amounts of original stocks held. Prior to being distributed, these stock dividends are listed as stockholder's equity under the title "stock dividends distributable." This amount is calculated by taking multiple financial factors into account.
1. Convert the percentage declaration of the stock dividend into a decimal. Do this by dividing the percentage by 100. For example, if a company declares a 15 percent stock dividend, you would divide 15 by 100 to get 0.15.
2. Multiply the number of shares by your answer from Step 1. Consider an example in which the company has 5 million outstanding shares. In this case, you would multiply 5 million by 0.15 to get 750,000.
3. Multiply the product from Step 2 by the par value of the stock. The standard par value for stock is $0.01. In this example, you would multiply 0.01 times 750,000 to get $7,500. This is the amount of stock dividends that will be issued to stock holders. Between the time of the company's declaration and the actual issuing of dividends, the company would list $7,500 as stock dividend distributable.
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