Stock Dividend Law and Legal Definition

Stock dividend is a dividend paid in stock instead of cash and expressed as a percentage of the number of shares already held by a shareholder.

It is paid by a corporation in stock of the corporation or in stock which the corporation holds in another corporation.

The declaration of stock dividend involves the creation and issuing of new stock to be distributed pro rata to the shareholders as evidence of the contemporaneous transfer of an equivalent amount of the surplus earnings or profits to the capital fund of the corporation.