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A dividend which is paid in additional shares rather than in cash. A company will offer a scrip dividend if it wants to retain cash in the business. And sometimes, dividends can be either in the form of shares or cash or both. Scrip dividends increase the number shares which the company has in issue and so they dilute the value of each share - so in the end, if all shareholders take up a scrip dividend, they gain as much as they lose.