What effect does a stock dividend have on the number of shares owned?

A stock dividend results in an increase in the number of shares owned by shareholders. When a company issues a stock dividend, it distributes additional shares to current shareholders based on the number of shares they already own. For example, if a company declares a 10% stock dividend, a shareholder who owns 100 shares would receive an additional 10 shares, resulting in a total of 110 shares after the dividend is paid.

This increase in shares does not change the overall value of the investor's investment in the company immediately, as the price per share typically adjusts downward to reflect the increase in the total number of shares outstanding, maintaining the same overall market capitalization for the company. The total investment amount remains unchanged since shareholders now own more shares, but the value per share may decrease accordingly.