Payment of a corporate dividend in the form of stock rather than cash. The stock dividend may be additional shares in the company, or it may be shares in a subsidiary being spun off to shareholders. Stock dividends are often used to conserve cash needed to operate the business. Unlike a cash dividend, stock dividends are not taxed until sold.
Stock dividends are dividends paid in shares of the issuing corporationâ€™s stock instead of cash. Their effect is the same as that of a stock split. For example, just as a $200 per share stock will sell for $100 after a 2-for-1 stock split, so it will sell for $100 after a 100% stock dividend. In a 100% stock dividend or a 2-for-1 stock split, there are twice as many shares outstanding.