A dividend which shareholders have the option to receive in the form of additional shares in the company instead of cash. The main benefit for a company of a scrip dividend is that it retains cash for use in the business.

To satisfy elections for a scrip dividend, the company can issue new shares to shareholders or, if the dividend has been declared by shareholders, transfer shares that it holds in treasury (see Article, Treasury shares: can they be used to satisfy elections for shares under a scrip dividend?). This contrasts with a dividend re-investment plan, where the company's registrars arrange for shares to be purchased in the market.

For more information on scrip dividends, see Practice note, Scrip dividends.