What does the 2% stock dividend at Arrow Financial Services mean for shareholders?

arrowArrow Financial Corporation (AROW) declared a stock dividend on August 28, 2013. The following news release appeared in PR Newswire:

 “GLENS FALLS, N.Y., Aug. 28, 2013 /PRNewswire/ — Thomas J. Murphy, President and CEO, announced that a 2% stock dividend was declared on August 28, 2013 and will be distributed on September 27, 2013. Shareholders of record on September 19, 2013, will receive two additional shares of Arrow Common Stock for every one hundred shares owned. They will also receive the cash equivalent of any fractional shares which they are entitled, since no partial shares will be issued.”

Questions

  1. Specify the following dates:
    1. Date of declaration
    2. Date of record
    3. Date of distribution
  2. If a shareholder owned 1,250 shares of Arrow Financial on September 19, 2013, how many shares of Arrow Common Stock would she have received for the stock dividend? Assume that the per-share price for one share of Arrow Financial on September 19, 2013, was $25.83. How much cash would the shareholder have received from the stock dividend?
  3. Again assume that the per-share price for one share of Arrow Financial on September 19, 2013, was $25.83. If a shareholder owned 98 shares on September 19, 2013, what would be the total number of shares of stock the shareholder would have received on the date of distribution? What would be the total amount of cash she would have received on the date of distribution?
  4. Why would a company want to issue a stock dividend?

Instructor Resources

These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below. †Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions. †The YouTube video link below is a narration of the blog post article (no discussion questions are included in the YouTube video; those can be assigned separately.)

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License.

About Dr. Wendy Tietz, CPA, CMA, CGMA

Dr. Wendy Tietz is a professor of accounting at Kent State University in Kent, Ohio, USA. She is also a textbook author with Pearson Prentice-Hall.

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