Q: FTN announced today that for every 100 shares you own they will issue you 10 more shares.I imagine the price of the shares will drop approx. 10% the day they are issued.My question is why wouldn't they just increase the dividend 10%?
5i Research Answer:
Dividends are paid with cash, but increasing the number of shares potentially, over time, results in more fees to the management company (if shares do well). Paying out cash means that amount of assets is gone and will never earn fees.