Written by the Fiveable Content Team • Last updated September 2025
Written by the Fiveable Content Team • Last updated September 2025
Definition
Stock dividend is a payment made by a corporation to its shareholders in the form of additional shares, rather than cash. This action increases the number of shares outstanding while maintaining the company's total market capitalization.
5 Must Know Facts For Your Next Test
Stock dividends do not affect the overall value of shareholders' equity.
The issuance of stock dividends results in an increase in the number of shares outstanding.
Stock dividends are recorded as a transfer from retained earnings to paid-in capital accounts.
They can be classified as either small (less than 20-25% of outstanding shares) or large (more than 20-25% of outstanding shares).
Stock dividends typically lead to a decrease in the company's stock price per share due to dilution.
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Related terms
Cash Dividend: A distribution of profits by a corporation to its shareholders paid in cash.
Property Dividend: A non-cash dividend paid out in the form of assets other than cash, such as physical goods or investments.
Stock Split: An action taken by companies to divide their existing shares into multiple new shares, increasing the number of shares while proportionally reducing the price per share.