Stock or Scrip Dividend (also see Dividend section)

Stock dividends are paid out to shareholders by issuing new shares in the company. These are paid out pro-rata (or proportional) to the number of shares the shareholder already owns. A stock dividend strategy is often employed when a company does not have the cash to pay or wants to preserve cash for other investments.

Stock dividendss sometimes require a holding period.

Stock dividends are not taxed until the shares granted are sold.

Scrip dividends are also known as capitalisation issues, or bonus issues.

Scrip dividends are often offered as an alternative to cash dividend. It is an option to receive the dividend in shares.

Both stock and scrip dividends are exempt from stamp duty and dealing charges. They are effectively a dividend reinvestment policy (DRIP) without associated expenses.

The investor must still report the cash value of the scrip dividend on their tax return like a normal cash dividend. This differs from a stock dividend in the United States, where the investor does not pay any tax on receipt of the shares and then only capital gains taxes on the stock dividend until the shares are sold.

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