Investors invested in dividend-paying stocks do not have to sell their shares to participate in the growth of the stock.They reap the monetary benefits without selling the stock.
Scrip dividend is a promissory note to pay the shareholders later.
This type of dividend is used when the company does not have sufficient funds for the issuance of dividends.
When the company returns the original capital contributed by the equity shareholders as a dividend, it is termed as liquidating dividend.
The payment of dividends requires a lot of record-keeping at the company’s end.
The company has to ensure that the right owner of the share receives the dividend.