Giving shareholders additional shares of stock. A stock dividend doesnÂ’t involve assets being distributed as a cash dividend does. Total stockholdersÂ’ equity is not affected by a stock dividend. Instead, a stock dividend transfers equity from the retained-earnings section to the contributed-capital section of the stockholdersÂ’ equity section on the companyÂ’s balance sheet. One reason companies do a stock dividend is to give shareholders a financial reward without paying out cash. Also, a stock dividend spares shareholders from paying tax on a dividend.