Scrip dividend
A scrip dividend is a dividend the company pays in new shares instead of cash, usually offering a choice: receive shares, sell the right back to the company at a set price, or sell it on the market. For the company it is a way of paying shareholders without cash leaving the business, except what it pays those who choose cash. Since the new shares split the same company into more pieces, whoever takes cash ends up with a slightly smaller stake, offset by the cash received, and whoever takes shares keeps theirs or raises it slightly.
How it is calculated
A company whose share trades at €10 offers one new share for every 40 held. Someone with 400 shares receives 10 new ones: the equivalent of 10 × €10 = €100, that is, €0.25 per share. The company usually offers to buy the right at a similar price, €0.25, for whoever prefers cash. If half the shareholders choose shares, the share count rises 1.25% and whoever took cash ends up owning roughly 1.2% less of the company, in exchange for the €0.25 per share received; whoever took shares goes up slightly. Unless the company cancels shares for an equivalent amount, the dividend did not come out of the cash: it came out of the share count.
The figures in the example are invented and rounded so the arithmetic can be redone by hand. They are not data from any real company.
What it is NOT
It is not a "free" dividend or "shares as a gift": the new shares come from dividing the same company into more pieces, which is why the price adjusts as in any capital increase. Nor is it the same as reinvesting a cash dividend: here the company only pays out what it gives those who choose cash and, unless it cancels shares for the same amount, the real payout is smaller than it looks. And it is not a capital increase that raises money: no money comes in, it only changes form.
Formula
New shares = shares held ÷ shares required per new share See also
Explained in depth
On real data
What dividend each IBEX 35 company declares and which filing it comes from: IBEX 35 dividends (in Spanish); the dates of each payment, in the dividend calendar (in Spanish).
See it on real data
Celsmar computes this from the accounts companies file with their regulator, and shows which line every figure comes from. Free to start, no card.
Definition for informational purposes. It is not financial advice nor a recommendation to buy or sell.