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A dividend that is paid off in the form of additional shares of stock rather than as cash.

There are two main advantages to stock dividends, one for the company and one for the investor.

  • First, it conserves cash for the company. Instead of paying out cash, the company is losing some of the stock it had held in reserve; this is generally not a good thing, but if the company is going through some hard times this may be preferable to giving out the actual cash.
  • Second, stock dividends are usually not taxed until they are sold, while cash dividends are taxed upon payment.

Dividends may not divide evenly into stocks, resulting in fractional shares; these are paid off in cash.

Payment of dividends in stock is indicated in stock transition tables by the symbols b or t.

Other types of dividends are Bond dividend, Cash dividend, and Scrip dividend. Other dividends that a company may give to adjust its finances are Capital dividend (AKA Return of capital), Liability dividend, Liquidating dividend, and Scrip dividend.

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