Accumulating Shares

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DEFINITION of 'Accumulating Shares'

Common stock given to current shareholders of a company in place of or in addition to a dividend. By accumulating shares shareholders don't have to pay income tax on these shares; however, it is still mandatory to pay capital gains tax on them. Sometimes companies pay out these shares in addition to dividends paid in cash. These shares are one way companies replace annual income with capital growth. Also referred to as a stock dividend.

INVESTOPEDIA EXPLAINS 'Accumulating Shares'

These types of shares are different from dividends in that dividends are a distribution made to shareholders directly out of company profits and usually paid in cash. In certain situations, these shares can also be paid in the form of property. Stock dividends are paid out to shareholders in the form of shares of stock that increases a stockholders share amount.

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