Which is a financial reason for distributing stock dividends?

Distributing stock dividends is a strategy used by companies primarily to preserve cash. When a company issues stock dividends, it essentially rewards shareholders by providing them additional shares rather than cash. This approach allows the company to avoid depleting its cash reserves, which is particularly beneficial during periods when maintaining liquidity is crucial. By opting for stock dividends, companies can continue to reward investors while also retaining cash for operational needs, capital expenditures, or to bolster the balance sheet. This helps ensure financial stability and flexibility.

The other options do not align with the primary financial motives for issuing stock dividends. Generating positive cash flow is more about earning revenue and managing expenses rather than issuing stock. Consolidating shareholder control could be a strategic move, but it is not primarily a financial reason. Paying off existing debts typically requires cash outflows, which contradicts the intent of preserving cash through stock dividends.