A stock dividend is a dividend paid out by a corporation to shareholders at certain intervals. However, instead of a normal dividend, which pays out money at certain intervals, a stock dividend pays out shares of stock.
In the context of the law, companies who promise stock dividends are legally obligated to give them.
Stock dividends can come in percentages of shares, such as .05% of a share, or as full shares. Companies often offer stock dividends as a way to create incentive for people to buy shares of their stock.
As with normal dividends, the more shares of stock that a person holds, the higher the amount of dividends that he or she will receive.
Dividends are a way for investors to get a return on investment without the price of the stock actually having to go up. This is why many investors like them.
A company that refuses to pay dividends that are legally owed to investors can face legal consequences.