Stock dividends usually lower the value of a single share of stock because there are more shares in existence. Thus, you do not directly gain anything from the stock dividend. Also, a dividend paid in stock only is not taxable. However, if shareholders have the option of taking either a cash or stock dividend, then the dividend is taxed no matter what the stockholder chooses. A dividend paid in stock to preferred stockholders instead of their cash dividend is taxable no matter what.
Common stock has both advantages and disadvantages.
Its advantages are twofold. First, its returns in the form of both dividends and price appreciation may be quite good. The main disadvantage of common stock is its risk. Although the returns on common stock may be high, the risk or uncertainty associated with the receipt of this expected return is also great. Generally, the higher the expected return, the greater the risk involved in actually receiving the return.