Property dividend

Definition

Property dividend is a distribution of assets, other than cash, to shareholders. This can include items such as real estate, investments, or inventory.

5 Must Know Facts For Your Next Test

1. Property dividends are recorded at the fair market value of the assets being distributed.
2. They often cause a reduction in retained earnings and a corresponding decrease in total assets.
3. The declaration and distribution of property dividends may trigger tax consequences for both the corporation and its shareholders.
4. Before distributing property dividends, companies must revalue the asset to its current market value, recognizing any gain or loss in income.
5. Property dividends are less common than cash or stock dividends but provide an alternative way to return value to shareholders.

Review Questions

• How are property dividends valued when they are declared?
• What impact do property dividends have on a company's financial statements?
• Why might a company choose to issue a property dividend instead of a cash dividend?

Related terms

Cash Dividend: A payment made by a corporation to its shareholders in the form of cash from current or retained earnings.

Stock Dividend: A dividend payment made in the form of additional shares rather than cash.

Retained Earnings: The portion of net income that is retained by the corporation rather than distributed to its shareholders as dividends.