Stock dividends are given to a company's shareholders as dividend payout at the end of every financial year. This is quite similar to the cash dividends but instead, stocks are what is paid out in terms of dividends. Stock splits, on the other hand, are done when the company's stock prices are too high, the splits are done to reduce the stock prices in order to increase the liquidity of the stock and to make the stocks more affordable to potential investors. Stock dividends tend to increase the number of shares that the shareholders will have, his, in turn, will decrease the prices of the stocks. The stock split will increase the number of outstanding shares because more investors are able to purchase stocks at a regular lot price.
In cases where the company has to choose between stock dividends and stock split, Brown & Brown opted for a stock split. This is because, after the split, the shareholders will be able to double their shares and at the same time increase the chances of having new investors within the company. Stock dividends have a major disadvantage because it reduces the retained earnings of the company. The 2 for 1 split has a lot of advantages as compared to the Stock dividends Distribution method.
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A recent example of a company that has used the 2 for 1 stock split is the Brown & Brown Inc. the company recently declared their split of stock which has increased the stock of the company form 138 Million and has doubled the stocks to 276 Million shares (Newswire, 2018). This has increased the shares of the shareholders of the company but has reduced the price of a share which is more likely to increase the number of incoming investors. It also makes it easier for the existing shareholders to sell their doubled shares.
References
Newswire, G. 2018. Brown & Brown Inc Completes 2-for-1 Stock split. Retrieved https//www.google.com/amp/s/www.cnbc.com/amp/2018/03/28/globe-newswire-brown-brown-inc-completes-2-for-1-stock-split.html
