Contrast the differences between a stock dividend and a stock split. Imagine that you are a stockholder in a company.

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As a stockholder in a company, it is important to understand the differences between stock dividends and stock splits. At first glance, these two terms appear to be interchangeable, however there are distinct differences that should be taken into consideration.

A stock dividend is when a company distributes its earnings or profits to its shareholders by issuing an additional shares of their existing stocks. This form of dividend payment doesn’t involve any cash payments and can result in an increase in the total number of outstanding shares if the company chooses to issue more than one share per original held. As a shareholder, this means you will now own more shares without paying anything extra but your ownership percentage remains unchanged since the total amount of outstanding shares has also increased.

On the other hand, a stock split occurs when a single share is divided into multiple parts (usually 2-4). Each portion would represent part ownership of that same single share prior to being split; therefore the number of outstanding shares increases while each individual’s ownership percentage decreases proportionately as well. Consider it like cutting up one slice of pizza instead of having one large slice; you end up with smaller slices but still end up with just as much pizza overall. In this case though, you wouldn’t receive any additional money for having made things smaller; rather all owners get equal parts and no new money is exchanged at all – making it different from receiving actual dividends paid out from earnings/profits as was discussed previously..

To sum it up: A stock dividend involves distributing earnings/profits while increasing total outstanding shares but leaving your ownership percentage unchanged whereas with a stock split your individual ownership percent drops correspondingly as each share gets divided into multiple parts but no exchange of money takes place either way.