Analyze cash dividends and stock dividends
Response to the following problem:
United Parcel Service (UPS), Inc., had the following stockholders' equity amounts on December 31, 2014 (adapted, in millions):
Common stock and additional paid-in capital; 1,135 shares issued..................... $ 278
Retained earnings ..................................................................................... 9,457
Total stockholders' equity......................................................................... $9,735
During 2014, UPS paid a cash dividend of $0.715 per share. Assume that, after paying the cash dividends, UPS distributed a 10% stock dividend. Assume also that during the following year, UPS declared and paid a cash dividend of $0.65 per share. Suppose you own 10,000 shares of UPS common stock, acquired three years ago, prior to the 10% stock dividend. The market price of UPS stock was $61.02 per share before the stock dividend.