Stock Dividend vs. Stock Split: Know the Difference
By Shumaila Saeed || Published on January 30, 2024
A stock dividend is a payout to shareholders in additional shares, while a stock split increases the number of shares by dividing each existing share.
Key Differences
A stock dividend is a distribution of additional shares to shareholders, proportionate to their existing holdings, typically issued from the company's retained earnings. A stock split, however, is a decision by a company to divide its existing shares into multiple new shares, with the aim of making the stock more affordable and increasing liquidity.
Shumaila Saeed
Jan 30, 2024
In a stock dividend, shareholder equity is redistributed but not increased; shareholders own more shares but their total value remains the same. In a stock split, the total number of shares increases, but the market capitalization of the company remains unchanged, as does the individual shareholder's proportionate stake.
Shumaila Saeed
Jan 30, 2024
Stock dividends are less common than stock splits and are often seen as a sign of a company's profitability and stable financial health. Stock splits are more frequent, especially in companies whose share prices have increased significantly, making their shares less affordable for average investors.
Shumaila Saeed
Jan 30, 2024
Following a stock dividend, the share price may adjust to reflect the increased number of shares but overall value remains stable. After a stock split, the share price is adjusted down, in direct proportion to the split ratio, making the shares appear more accessible to investors.
Shumaila Saeed
Jan 30, 2024
A stock dividend can be seen as a positive signal, indicating a company’s robust financial position and commitment to rewarding shareholders. A stock split, while neutral in economic terms, is often perceived positively as it suggests confidence in the company's future growth and a desire to broaden its investor base.
Shumaila Saeed
Jan 30, 2024
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Comparison Chart
Nature of Distribution
Distribution of additional shares
Division of existing shares into more
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Impact on Market Cap
No change in market capitalization
Market capitalization remains the same
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Jan 30, 2024
Shareholder Equity
Equity redistributed, not increased
Total shares increase, equity unchanged
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Jan 30, 2024
Share Price Adjustment
Adjusts but overall value remains stable
Adjusts down proportionally to the split
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Jan 30, 2024
Investor Perception
Indicates financial health and profitability
Suggests share affordability and growth confidence
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Jan 30, 2024
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Stock Dividend and Stock Split Definitions
Stock Dividend
Stock Dividend represents a reinvestment of earnings into additional shares.
The stock dividend allowed investors to increase their shareholding without investing more cash.
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Stock Split
Stock Split does not affect the company's market capitalization.
Despite the stock split, the company's total market value remained unchanged.
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Jan 09, 2024
Stock Dividend
Stock Dividend is a dividend payment made in the form of additional shares.
The company issued a 5% stock dividend, giving shareholders 5 extra shares for every 100 owned.
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Jan 09, 2024
Stock Split
Stock Split is the division of a company's existing stock into multiple shares.
The company’s 2-for-1 stock split doubled the number of shares each investor held.
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Jan 09, 2024
Stock Dividend
Stock Dividend is a way for companies to reward shareholders without using cash.
Opting for a stock dividend, the company preserved cash for its operational needs.
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Stock Split
Stock Split aims to increase liquidity and affordability of shares.
The stock split resulted in increased trading volume due to lower share prices.
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Jan 09, 2024
Stock Dividend
Stock Dividend is a proportionate distribution of shares based on ownership.
Each shareholder received stock dividends proportional to their current shareholding.
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Jan 09, 2024
Stock Split
Stock Split keeps the overall value of an investor's holding constant.
His investment value remained the same post-split, despite owning twice as many shares.
Shumaila Saeed
Jan 09, 2024
Stock Dividend
Stock Dividend increases the number of shares but maintains the same equity value.
After the stock dividend, her total investment value remained the same, though she owned more shares.
Shumaila Saeed
Jan 09, 2024
Stock Split
Stock Split reduces the price of individual shares by increasing their quantity.
After the stock split, the share price was halved, making it more accessible to small investors.
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Jan 09, 2024
Repeatedly Asked Queries
What is the purpose of a Stock Split?
A Stock Split aims to make shares more affordable and increase market liquidity.
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Jan 30, 2024
How does a Stock Dividend affect shareholder value?
A Stock Dividend redistributes existing equity; the total value of holdings remains the same but with more shares.
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Jan 30, 2024
Does a Stock Dividend mean I get more value?
Not in terms of market value; you get more shares, but the total investment value remains the same.
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Jan 30, 2024
What is a Stock Dividend?
A Stock Dividend is a dividend payment made by a company in the form of additional shares.
Shumaila Saeed
Jan 30, 2024
What is a Stock Split?
A Stock Split is the division of a company's existing shares into a larger number of shares.
Shumaila Saeed
Jan 30, 2024
Does a Stock Split change a company's market cap?
No, a Stock Split does not change the company's market capitalization.
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Jan 30, 2024
What happens to my shares in a Stock Split?
In a Stock Split, the number of your shares increases, but the total value of your investment remains the same.
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Jan 30, 2024
What are common Stock Split ratios?
Common Stock Split ratios include 2-for-1, 3-for-1, and even higher multiples.
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Jan 30, 2024
Can a Stock Dividend affect the share price?
Post a Stock Dividend, the share price may adjust, but the overall equity value remains constant.
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Jan 30, 2024
Is a Stock Dividend better than a cash dividend?
It depends on the shareholder’s preference for additional shares versus immediate cash.
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Jan 30, 2024
Can any company issue a Stock Dividend?
Only companies with sufficient retained earnings typically issue Stock Dividends.
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Jan 30, 2024
Are Stock Dividends common?
Stock Dividends are less common than cash dividends and are typically offered by companies with excess profits.
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Jan 30, 2024
Why do companies perform Stock Splits?
Companies perform Stock Splits to lower the share price and make the stock more accessible.
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Jan 30, 2024
Can a Stock Split be reversed?
Yes, companies can reverse a stock split, known as a reverse stock split, consolidating shares.
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Jan 30, 2024
Are Stock Dividends taxable?
Stock Dividends may be subject to taxes depending on the country’s tax laws.
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Jan 30, 2024
How does a Stock Split affect per-share metrics?
Per-share metrics like EPS (Earnings Per Share) are adjusted in proportion to the split.
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Jan 30, 2024
Does a Stock Split indicate company growth?
A Stock Split itself doesn't indicate growth but can be a sign of a company's past stock price appreciation.
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Jan 30, 2024
Is a Stock Split good for investors?
A Stock Split can be beneficial as it may improve liquidity and make the stock more accessible.
Shumaila Saeed
Jan 30, 2024
Do I need to pay for receiving a Stock Dividend?
No, Stock Dividends are issued free of cost but may have tax implications.
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Jan 30, 2024
What determines the ratio of a Stock Dividend?
The ratio is decided by the company, often based on their retained earnings and distribution strategy.
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Jan 30, 2024
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About Author
Written by
Shumaila SaeedShumaila Saeed, an expert content creator with 6 years of experience, specializes in distilling complex topics into easily digestible comparisons, shining a light on the nuances that both inform and educate readers with clarity and accuracy.
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