What is a key feature of stock dividends compared to cash dividends?

Stock dividends are a form of equity distribution to shareholders, where additional shares are given instead of cash. One key feature that distinguishes stock dividends from cash dividends is that stock dividends are typically non-taxable at the time they are issued. This means that shareholders do not have to recognize any taxable income immediately when they receive stock dividends; rather, the tax implication arises later when they sell the shares received through the stock dividend.

In contrast, cash dividends are considered taxable income in the year they are received, requiring shareholders to report them on their tax returns. This key feature of stock dividends being non-taxable can often make them more attractive to investors looking to increase their holdings without incurring immediate tax liabilities.

While other features and aspects, such as market price adjustments or benefit types, may come into play, the non-taxable characteristic is the distinguishing feature of stock dividends in comparison to cash dividends.