A stock dividend is a payment made by a company to its shareholders in the form of additional shares of the company's stock rather than cash. Instead of receiving cash, shareholders get more shares proportional to their existing holdings. For example, a 5% stock dividend means a shareholder receives 0.05 additional shares for every share they own, so owning 100 shares would result in 5 extra shares
. Stock dividends serve as a way for companies to reward investors without reducing their cash reserves. They do not affect the overall value of the company but do dilute the share price since more shares are issued. Unlike cash dividends, stock dividends are not taxed until the shares are sold by the shareholder
. In summary, stock dividends are distributions of additional shares to shareholders, maintaining their proportional ownership, and are an alternative to cash dividends, often used when companies want to conserve cash while still rewarding investors
