Stock dividend

A dividend paid in new shares rather than cash. Every holder keeps the same proportion of the company, so the price per share falls and nothing of value changes hands.

Where you will meet it

Stock dividend appears in 2 learning outcomes on the CFA syllabus. A few of them:

• Set out dividends, buybacks, reverse splits as well as ordinary stock splits, and the sequence of dates for a dividend
  CFA Level I · Equity Investments

  “Splits and stock dividends change the number of shares without changing the company's value, so the price adjusts in proportion; a reverse split cuts the share count, often to lift a low price above an exchange's minimum.”

• Explain the expected impact on shareholder wealth and on a company's financial ratios of cash dividends (regular, extra or liquidating), stock dividends, reverse stock splits and stock splits
  CFA Level II · Corporate Finance

  “Stock dividends, splits and reverse splits only change the share count: price per share moves inversely, a 10% stock dividend divides the price by 1.10, and market value, wealth and balance-sheet ratios are unchanged, while per-share figures such as EPS, DPS and book value per share adjust for the new share count.”

Practise it

• Today's practice question One question, with every wrong option explained.
• Free Level I diagnostic test Twelve questions that show which topics to start with.
• Free finance calculators Check your arithmetic on the exam's core formulas.

All terms beginning with S · Glossary