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Stock Dividend

A stock dividend is a payment made by a company to its shareholders in the form of additional shares, rather than cash. Stock dividends increase the number of shares a shareholder owns but do not change the overall value of their investment. Companies may issue stock dividends to conserve cash or reinvest in growth while still rewarding shareholders. The value of the stock dividend is based on the current market price of the company's shares.

Example

A company announces a 5% stock dividend, meaning shareholders receive 5 additional shares for every 100 shares they own.

Key points

• A dividend paid in the form of additional shares rather than cash.

• Increases the number of shares held but not the overall investment value.

• Common when companies want to conserve cash or reinvest earnings.

Quick Answers to Curious Questions

They may want to conserve cash for reinvestment while still rewarding shareholders.

It increases the number of shares owned but does not change the overall value of the investment.

A stock dividend issues new shares based on a percentage of existing shares, while a stock split increases the total number of shares by dividing each existing share.