Stock Dividend

A stock dividend is a dividend that is paid in shares of the company's stock rather than in cash. A stock dividend, like a cash dividend, is a distribution of part of a company's earnings in proportion to the number of shares each shareholder owns. When a company pays a stock dividend the value of each share of stock is not altered, as it is in a stock split. A stock dividend can be used in place of a cash dividend, or a stock dividend can be paid in addition to a cash dividend. One advantage to the shareholder of a stock dividend as opposed to a cash dividend is that no tax is due on a stock dividend until the stock is sold, whereas tax is due for the tax year received for a cash dividend.