how a stock dividend works
a stock dividend may be paid out when a company wants to reward its investors but either doesn t have the spare cash or prefers to save it for other uses the stock dividend has the advantage of rewarding shareholders without reducing the company s cash balance however it does increase its liabilities stock dividends have a tax advantage for the investor as well unlike cash dividends stock dividends are not taxed until the investor sells the shares a stock dividend may require that the newly received shares not be sold for a certain period this holding period typically begins the day after the dividend is received 1stock dividend dilution