What is Stock Dividends?
Stock dividends are distributions of additional shares to existing shareholders in proportion to their holdings, instead of cash. They increase the number of shares outstanding without changing total equity.
How It Works
- Board declares the stock dividend.
- Retained earnings are transferred to share capital and share premium.
- Shareholders receive new shares; share price typically adjusts down.
Saudi Context
Tadawul-listed Saudi companies sometimes issue stock dividends (bonus shares) to reward shareholders without depleting cash, subject to CMA approval and capital-increase rules.
Example
A Saudi company declares a 1-for-10 stock dividend. An investor holding 1,000 shares receives 100 additional shares.