stock dividend

Giving shareholders additional shares of stock. A stock dividend doesn’t involve assets being distributed as a cash dividend does. Total stockholders’ 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 stockholders’ equity section on the company’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.