A company distribution of a portion of its earnings to its shareholders in the form of additional stock of the company as a supplement or in place of cash dividends is called a stock dividend.
Stock dividend is defined as a distribution of dividend payment to shareholders in a from of additional company shares/stocks rather than in a form of a cash payment to its shareholders. The main reason that a company may want to issue a stock dividend in place of a cash dividend is that the company may be experiencing a shortage of liquid cash reserves, or to preserve and maintain its cash reserve. Another reason for a stock dividend payment may be that the company is trying to increase the number of outstanding shares, or to decrease the stock value of the company, therefore making the stock price affordable.
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