A stock dividend is a payment made by a company to its shareholders, usually in the form of additional shares rather than cash. When a company earns profits, it can choose to reinvest that money or reward its investors. By issuing stock dividends, the company increases the number of shares each shareholder owns, which can enhance their overall investment value over time. For example, if you own 100 shares of a company and it declares a 10% stock dividend, you will receive 10 additional shares. This means you now own 110 shares, which can lead to greater returns if the company's value increases in the future.