Tuesday, May 15, 2012

What is a Stock Dividend?

A stock dividend is a pro rata distribution to stockholders of the corporation’s own stock.  In comparison to a cash dividend where a company pays cash,  a company will issue shares of its own stock in a stock dividend.

On the balance sheet, a stock dividend results in a decrease in retained earnings and an increase in paid-in capital. Unlike a cash dividend, a stock dividend does not decrease total stockholders’ equity or total assets.

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