Stock Dividend and Stock Split are corporate actions that affect a company’s shares, but they differ in purpose and impact. A Stock Dividend involves issuing additional shares to existing shareholders as a reward, proportional to their holdings, without changing the company’s overall market capitalization. A Stock Split, however, divides existing shares into multiple smaller shares, reducing the share price while keeping the shareholder’s total ownership value unchanged, making shares more affordable and increasing liquidity.

What is a Stock Dividend?

A stock dividend involves a company distributing additional shares to shareholders instead of cash dividends. This type of dividend is usually given as a percentage of the existing shares a shareholder owns. For example, a 10% stock dividend means an investor receives one additional share for every ten shares they hold. Stock dividends are typically issued from a company's retained earnings and are a way for companies to reward shareholders without reducing their cash reserves.

Examples of Stock Dividends:

1. A company may issue a 5% stock dividend, thus giving shareholders 5 extra shares for every 100 shares they own.
2. During periods of cash conservation, a firm might opt to provide dividends in the form of additional shares rather than cash payouts.

What is a Stock Split?

A stock split occurs when a company divides its existing stock into multiple shares to boost the stock's liquidity. Although the number of shares increases, the total dollar value of the shares remains the same, meaning that the split does not add any real value. The most common splits are 2-for-1 or 3-for-1, which means that a shareholder receives two or three shares for each share they originally held.

Examples of Stock Splits:

1. A company with a high share price might perform a 2-for-1 split to make the stock more accessible to small investors.
2. If a stock is trading at a very high price, a company might use a stock split to adjust the per-share price to a more comfortable trading range.

Difference Between Stock Dividend and Stock Split:

Basis	Stock Dividend	Stock Split
Definition	Distribution of additional shares to shareholders.	Increasing the number of shares by splitting existing shares.
Purpose	To reward shareholders without using cash.	To increase marketability and liquidity of the stock by reducing its price per share.
Effect on Share Value	No change in market cap; slight dilution of share value.	No change in market cap; decreases price per share proportionally.
Impact on Ownership	Increases the number of shares but not the percentage ownership.	Increases the number of shares but maintains the same percentage ownership.
Common Ratios	Often expressed as a percentage like 5%, 10%.	Common ratios are 2-for-1, 3-for-1, etc.
Investor Benefit	Provides additional shares that may increase in value over time.	Makes the stock more affordable to smaller investors and can lead to higher liquidity.