Financial Term Explorer
Stock Dividend
Dividends paid as additional shares instead of cash. Share count increases but total value remains the same.
📝 Definition
**Stock Dividend** pays additional shares instead of cash. A 10% stock dividend means 100 shares become 110 shares. Total value stays the same as stock price adjusts accordingly.
In Simple Terms
Like cutting a pizza from 8 slices to 16 - more pieces but same pizza. More shares, but each worth proportionally less.
Example
With 100 shares receiving 10% stock dividend, you now have 110 shares. Price adjusts so total value is unchanged.
💡 Practical Tips
- 1Stock dividends aren't taxed until you sell, providing tax deferral.
- 2Long-term, compounding share increases can be significant.
⚠️ Common Mistakes
Stock dividends aren't 'free shares.' Price adjusts downward proportionally.
❓ Frequently Asked Questions
When are stock dividends taxed?▼
When you sell the shares, taxed as capital gains.