STOCK DIVIDENDS 
33 
ployed may be illustrated by the action in this respect (as reported in Moodys 
Manual, 1918 Industrial, and the Commercial and Financial Chronicle), of some 
of the Standard Oil Companies, since the disintegration pursuant to the decision 
of this court in 1911. (Standard Oil Co. ». United States, 221 U. 8. 1.) 
(a) Standard Oil Co. (of Indiana), an Indiana corporation. It had on Decem- 
ber 31, 1911, $1,000,000 capital stock (all common), and a large surplus. On 
May 15, 1912, it increased its capital stock to $30,000,000, and paid a simple 
stock dividend of 2,900 per cent in stock.2 
(b) Standard Oil Co. (of Nebraska), a Nebraska corporation. It had on 
December 31, 1911, $600,000 capital stock (all common), and a substantial 
surplus, On April 15, 1912, it paid a simple stock dividend of 33814 per cent, 
increasing the outstanding capital to $800,000. During the calendar year 1912 
it paid cash dividends aggregating 20 per cent; but it earned considerably more, 
and had at the close of the year again a substantial surplus. On June 20, 1913, 
§ declared a further stock dividend of 25 per cent, thus increasing the capital to 
1,000,000. 
1) The Standard Oil Co. (of Kentucky), a Kentucky corporation. It had on 
December 31, 1913, $1,000,000 capital stock (all common), and $3,701,710 
surplus. Of this surplus $902,457 had been earned during the calendar year 
1913, the net profits of that year having been $1,002,457 and the dividends paid 
only $100,000 (10 per cent). On December 22, 1913, a cash dividend of $200 
per share was declared payable on February 14, 1914, to stockholders of record 
January 31, 1914; and these stockholders were offered the right to subscribe for 
an equal amount of new stock at par and to apply the cash dividend in payment 
therefor. The outstanding stock was thus increased to $3,000,000. During 
the calendar years 1914, 1915, and 1916, quarterly dividends were paid on this 
stock at an annual rate of between 15 per cent and 20 per cent, but the company’s 
surplus increased by $2,347,614, so that on December 31, 1916, it had a large 
surplus over its $3,000,000 capital stock. On December 15, 1916, the company 
issued a circular to the stockholders, saying: 
‘The company’s business for this year has shown a very good increase in 
volume and a proportionate increase in profits, and it is estimated that by January 
1, 1917, the company will have a surplus of over $4,000,000. The board feels 
justified in stating that if the proposition to increase the capital stock is acted 
on favorably, it will be proper in the near future to declare a cash dividend of 
100 per cent; and to allow the stockholders the privilege pro rata according to 
their holdings, to purchase the new stock at par, the plan being to allow the 
stockholders, if they desire, to use their cash dividend to pay for the new stock.” 
The increase of stock was voted. The company then paid a cash dividend of 
100 per cent, payable May 1, 1917, again offering to such stockholders the right 
to subscribe for an equal amount of new stock at par and to apply the cash 
dividend in payment therefor. 
Moodys Manual, describing the transaction with exactness, says first that the 
stock was increased from $3,000,000 to $6,000,000, “a cash dividend of 100 per 
cent, payable May 1, 1917, being exchanged for one share of new stock, the 
equivalent of a 100 per cent stock dividend.” But later in the report giving as, 
customary in the Manual, the dividend record of the eompany, the Manual 
says: “A stock dividend of 200 per cent was paid February 14, 1914, and one 
of 100 per cent on May 1, 1917.” And in reporting specifically the income ac- 
count of the company for a series of years ending December 31, covering net 
profits, dividends paid, and surplus for the year, it gives, as the aggregate of 
dividends for the year 1917, $660,000 (which was the aggregate paid on the 
quarterly cash dividend—>5 per cent, January and April; 6 per cent, July and 
October); and adds in a note: ‘““In addition a stoek dividend of 100 per cent was 
paid during the year.” 4 The Wall Street Journal of May 2, 1917, page 2, 
quotes the 1917 “High” price for Standard Oil of Kentucky as “375 ex stock 
dividend.” 
It thus appears that among financiers and investors the distribution of the 
stock by whichever method effected is called a stock dividend; that the two 
methods by which accumulated profits are legally retained for corporate pur- 
poses and at the same time distributed as dividends are recognized by them to 
? Moodys, p. 15.4; Commercial and Financial Chronicle, vol. 94, p. 831; vol. 98, pp. 1005, 1076. 
’ hei 1548; Commercial and Financial Chronicle, vol. 94, p. 771; vol. 96, p. 1428; vol. 97, p. 1434; 
 Moodys, p. 1547; Commercial and Financial Chronicle, vol. 97, pp. 1589, 1827, 1903; vol. 98, pp. 76, 
457; vol. 103, p. 2348. Poor's Manual of Industrials (1918), p. 2240 in gine the Comparative income 
account’ of the company describes the 1914 dividend as ‘Stock dividend paid (200 per cent)—$2,000,000 Ms 
and describes the 1917 dividend as ** $3,000,000 special cash dividend.’