What is the primary outcome of issuing a stock dividend regarding shareholders' ownership?

Issuing a stock dividend primarily results in shareholders maintaining their ownership percentage. When a company decides to issue a stock dividend, it distributes additional shares to existing shareholders proportional to their current holdings. For instance, if a shareholder owns 10% of a company's shares before the dividend is issued, they will continue to own approximately 10% of the company after receiving the additional shares.

This process does not change the total value of the shareholders' investment nor does it dilute their ownership percentage, as all shareholders receive the same percentage increase in shares. Therefore, even though the number of shares outstanding increases, the relative ownership stake of each shareholder remains unchanged.

Stock dividends do not grant additional voting rights either, as those are tied to ownership relative to the total shares outstanding, which remains constant compared to the overall pie of ownership. Furthermore, shareholders are not required to pay for these additional shares; they are distributed automatically based on the shareholder's existing holdings.