Bonus shares, or "scrip dividends" or "capitalisation issues," are additional shares a company issues to its existing shareholders. These shares are distributed at no extra cost to the shareholders.
Bonus stock is a way for a company to reward its investors and show appreciation for their continued support.
Companies issue bonus shares to capitalise on their reserves or accumulated profits, converting them into additional shares. Shareholders receive these bonus shares in proportion to their existing shareholdings.
While bonus share issues do increase the number of shares an investor holds, they do not affect the overall ownership percentage in the company. This means that your proportional ownership stake remains the same even though you have more shares.
Bonus stock can enhance an investor"s portfolio without requiring additional investment. However, investors should also be aware of potential risks when incorporating bonus shares into their investment portfolio.
First Published: Jan 18, 2024, 16:46
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