Quick Finance Tip - Stock Dividend

Stock Dividends are a non-cash form of dividends, where the company distributes additional shares of its common stock to shareholders (rather than cash).

Each shareholder ends up with more shares and the company did not have to spend any actual "money". Stock Dividends does not affect the shareholder’s proportion or value of ownership position. Effectively, the total market value of the company is unaffected by the dividend because the decrease in share price offsets the increase in number of shares outstanding.

​Key difference between a stock and cash dividend is that cash dividend affects a company’s capital structure by reducing assets and owners equity. Stock dividends have increases in contributed capital offset by reductions in retained earnings (meaning a net effect of zero).