Stock dividends do not change the overall value of a shareholder's investment but distribute additional shares, diluting the book value per share while keeping the total book value unchanged. This results in a proportionate increase in shares held without affecting ownership percentage or voting power. The market value per share typically adjusts to reflect the increased share count, but the total market value of the shareholder's investment remains the same, assuming no other market factors change.

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Stock Dividends

Question 81

Multiple Choice

Stock dividends

A) have little economic substance for shareholders.
B) result in a proportionate increase in the number of shares held by each shareholder, but does not change that shareholder's ownership interest or proportionate voting power.
C) result in decreases to book value per common share, but each shareholder has a proportionately larger number of shares, so the total book value of each shareholder's interest remains unchanged.
D) result in the decline of market value per share should be commensurate with the proportional increase in shares, but all else equal, the total market value of an individual's shares should not change.
E) all of the above

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