Stock distribution = a payment event

Instead of cash, profit is paid out in stocks (shares).

In principal a dividend is the distribution or sharing of parts of profits to a company's shareholders. The primary purpose of any business is to create profit for its owners, and the dividend is the most important way the business fulfils this mission. When a company earns a profit, some of this money is typically reinvested in the business and called retained earnings, and some of it can be paid to its shareholders as a dividend. Paying dividends reduces the amount of cash available to the business, but the distribution of profit to the owners is, after all, the purpose of the business.

The methods of sharing profits are as follows:

• Stock dividends or Scrip dividends (common) are those paid out in the form of additional stock shares of the issuing corporation, or other corporation (e.g.; its subsidiary corporation). They are usually issued in proportion to the shares owned (e.g. for every 100 shares of stock owned, a 5% stock dividend will yield 5 extra shares). This is very similar to a stock split in that it increases the total number of shares, while lowering the price of each share and does not change the market capitalization.
• Cash dividends (most common) are those paid out in the form of "real cash". It is a form of investment interest/income and is taxable in the year that they are paid in. It is the most common method of sharing corporate profits.