What typically signifies a large stock dividend?

A large stock dividend is characterized by the issuance of new shares to existing shareholders, which means that the company distributes additional shares rather than cash. Typically, this type of dividend involves a significant percentage increase in the total number of shares outstanding, often exceeding 20%.

This method allows companies to reward their shareholders without impacting their cash reserves, thereby retaining liquidity to invest in business operations. The enlarged number of shares leads to dilution of earnings per share, reflecting a proportional increase in equity, but the overall value owned by shareholders in the company remains unchanged at the point of declaration.

In the context of the other options, cash distributions do not relate to stock dividends since they involve direct cash payouts rather than share increases. A low par value per share does not necessarily indicate a stock dividend; rather, par value is generally an arbitrary accounting value. Preferred stock distributions pertain to a different class of shares and do not constitute a typical stock dividend, which is usually associated with common stock. Therefore, the issuance of new shares to existing shareholders is the defining action behind large stock dividends, making it the correct choice.