A stock dividend of 5% gives you five extra shares for every hundred held and reduces the price by roughly the same proportion. Economically it is a small stock-split dressed as a dividend: the company keeps its cash and you own the same slice of the business.
Some companies offer a scrip alternative where holders elect cash or shares. Electing shares avoids a taxable cash receipt in some jurisdictions but increases your share count and adds new cost-basis lots.
Example: you hold 1,000 shares at $50, worth $50,000. A 5% stock dividend gives you 1,050 shares and the price adjusts to about $47.62. Your holding is still worth $50,000.
Related: stock-split, dividend, outstanding-shares