A dividend that is paid with some form of debt such as bond, rather than cash or stock. Sometimes, companies resort to the payment of dividends in the form of liability when they are short of cash (due to financial problems) or in cases where stock dividends are not desired by shareholders (for dilution-related concerns). The cash payment for this dividend will be made in the future. The holder of debt instrument (bond, note, promissory note, etc) may wait until the due date to collect cash or may discount it for immediate cash.
This type of dividend is also known as a scrip dividend.
