Osborn Corporation has paid 60 consecutive quarterly cash dividends (15 years). The last six months have been a real cash drain on the company; its profit margins have been greatly narrowed by increasing competition. With a cash balance sufficient to meet only day-to-day operating needs, the president, Barry Sigle, has decided that a stock dividend instead of a cash dividend should be declared. He tells Osborns financial vice president, Mandy Drummond, to issue a press release stating that the company is extending its consecutive dividend record with the issuance of a five percent stock dividend. Write the press release convincing the stockholders that the stock dividend is just as good as a cash dividend, he orders. Just watch our stock rise when we announce the stock dividend; it must be a good thing if that happens.

Who are the stakeholders in this situation?

Is there anything unethical about president Sigles intentions or actions?

What is the effect of a stock dividend on a corporations stockholders equity accounts? Which would you rather receive as a stockholdera cash dividend or a stock dividend? Why?