For a long-term investor, a stock dividend can also be a way of re-investing in a company that may grow and increase equity value in the future.
A related benefit is that investors planning to buy more of a particular stock can avoid broker commission fees in acquiring more shares.
One reason could be that it doesn’t have enough cash on hand to make a cash dividend payment, but desires to make some form of payment to shareholders to maintain investor confidence in the company.A corporation may liquidate by (a) paying off creditors and distributing the remaining assets in kind to the shareholders or (b) selling assets, paying off creditors, and distributing the remaining cash to the shareholders. If the corporation distributes the assets to the shareholders in kind pursuant to a plan of liquidation, it is treated as having sold the assets to the shareholder for fair market value. If the corporation instead sells the assets and distributes the remaining cash to the shareholder, it is taxed on the sale. Likewise, the shareholder is treated as though the shareholders sold their stock to the corporation for the value of the assets or cash received. The shareholder’s basis in property received pursuant to a plan of liquidation is the fair market value of the property at the time of the distribution.  I. Instead, the distribution is governed by the general nonrecognition rule of Code § 311(a), which prevent the corporation from recognizing loss on a transfer of depreciated property. § 302(b)(1), this test is usually used only when the safe harbors of I. Liquidation is a taxable event for both the shareholder and the corporation. Like the “Redemptions Not Equivalent to Dividends” test of I.