What is a stock dividend?

A stock dividend is a payment to shareholders in the form of additional shares in the company. Stock dividends are not taxed until the shares are sold by their owner. Like stock splits, stock dividends dilute the share price because additional shares have been issued. Stock dividends do not affect the value of the company.

How do dividends work?

Dividends are how companies distribute their earnings to shareholders. When a company pays a dividend, each share of stock of the company you own entitles you to a set dividend payment. Dividends can be cash, additional shares of stock or even warrants to buy stock.

Are dividends a cash or a stock dividend?

In the U.S., most dividends are cash dividends, which are cash payments made on a per-share basis to investors. For instance, if a company pays a dividend of 20 cents per share, an investor with 100 shares would receive $20 in cash. Stock dividends are a percentage increase in the number of shares owned.