What is the difference between a stock split and a stock dividend, and how do each of these affect shareholders?

A stock split occurs when a company increases the number of shares outstanding by issuing more shares to existing shareholders, typically to lower the share price and make it more affordable. For example, in a 2-for-1 stock split, shareholders receive an additional share for each one they already own, but the total value remains unchanged. A stock dividend, on the other hand, is when a company issues additional shares as a dividend instead of cash. Both actions increase the number of shares a shareholder owns, but neither directly increases the total value of the investment. However, stock splits can enhance liquidity, while stock dividends provide additional shares without requiring a cash outlay.