Why would a company issue stock dividends?

Issuing stock dividends serves several strategic purposes for a company, and reducing the market price of stock is one of these objectives. When a company declares a stock dividend, it distributes additional shares of stock to its existing shareholders instead of paying cash. This leads to an increase in the number of shares outstanding.

As the number of shares increases, the overall market value of the company remains the same, but each share represents a smaller portion of that value. Consequently, the market price per share is likely to decrease as supply increases, making this a tactic to adjust the share price to a more attractive level for investors. A lower share price can make the stock more affordable and appealing, potentially attracting new investors or retaining current shareholders.

It's important to note that while stock dividends do not directly alter the company's cash flow, total equity, or total assets in a profound way, they are primarily used to retain cash within the company instead of distributing it, thereby supporting further growth or operational needs.