What are examples of dividends?

There are endless examples of dividends, but we’ll focus on cash dividends and stock dividends. Let's assume you own 100 shares in Company ABC on the record date. At the end of the quarter, the company calculates its company earnings. The board of directors then reviews this information and declares a $0.10 dividend per share for the quarter.

What is a stock dividend?

A stock dividend is a payment to shareholders in the form of additional shares in the company. Stock dividends are not taxed until the shares are sold by their owner. Like stock splits, stock dividends dilute the share price because additional shares have been issued. Stock dividends do not affect the value of the company.

How does a stock dividend work?

The distributions are paid in fractions per existing share. For example, if a company issues a stock dividend of 5%, it will pay 0.05 shares for every share owned by a shareholder. The owner of 100 shares would get five additional shares. A stock dividend is a payment to shareholders in the form of additional shares in the company.