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Abstract Dispersal has far‐reaching implications for individuals, populations, and communities, especially in sessile organisms. Escaping competition with conspecifics and with kin are theorized to be key factors leading to dispersal as an adaptation. However, manipulative approaches in systems in which adults are sessile but offspring have behaviors is required for a more complete understanding of how competition affects dispersal. Here, we integrate a series of experiments to study how dispersal affects the density and relatedness of neighbors, and how the density and relatedness of neighbors in turn affects fitness. In a marine bryozoan, we empirically estimated dispersal kernels and found that most larvae settled within ~1 m of the maternal colony, although some could potentially travel at least 10s of meters. Larvae neither actively preferred or avoided conspecifics or kin at settlement. We experimentally determined the effects of spreading sibling larvae by manipulating the density and relatedness of settlers and measuring components of fitness in the field. We found that settler density reduced maternal fitness when settler neighbors were siblings compared with when neighbors were unrelated or absent. Genetic markers also identified very few half sibs (and no full sibs) in adults from the natural population, and rarely close enough to directly interact. In this system, dispersal occurs over short distances (meters) yet, in contrast with expectations, there appears to be limited kinship between adult neighbors. Our results suggest that the limited dispersal increases early offspring mortality when siblings settle next to each other, rather than next to unrelated conspecifics, potentially reducing kinship in adult populations. High offspring production and multiple paternity could further dilute kinship at settlement and reduce selection for dispersal beyond the scale of 10s of meters.