Which of the following correctly defines a stock dividend?

A stock dividend correctly refers to additional shares given to current shareholders at no cost. This distribution of shares allows shareholders to increase their investment in a company without requiring them to purchase additional stock. Instead of receiving cash from the company, shareholders receive more shares, maintaining their proportionate ownership in the company while avoiding dilution.

This method of distributing profits is often preferred by companies looking to reinvest profits back into the business while still rewarding shareholders. The stock price may adjust to reflect the increased number of shares outstanding, but the total value of the investment remains consistent, benefiting shareholders in the long term.

The other options incorrectly characterize stock dividends. Cash returns are not categorized as stock dividends; funds received in cash for investments reflect cash dividends. Offering stock in exchange for cash investments does not describe a stock dividend but rather outlines a purchase of stock. Furthermore, the repayment of a shareholder's investment amount suggests returning invested capital, which diverges from the concept of stock dividends that focus on distributing additional shares rather than repaying initial investment.