How does a stock dividend work?

The distributions are paid in fractions per existing share. For example, if a company issues a stock dividend of 5%, it will pay 0.05 shares for every share owned by a shareholder. The owner of 100 shares would get five additional shares. A stock dividend is a payment to shareholders in the form of additional shares in the company.

What happens when a company pays a dividend?

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. Both private and public companies pay dividends, but not all companies offer them and no laws require them to pay their shareholders dividends.

What is a stock dividend?

Its regular quarterly dividend rate remained 13 cents per share. A stock dividend is a dividend paid as shares of stock instead of cash. You can sell these dividend shares for an immediate payoff, or you can hold them. A stock dividend functions essentially like an automatic dividend reinvestment program (more on that below).