Which companies have recently announced bonus shares? Know if you are eligible.

Bonus shares are additional shares offered by companies to existing shareholders, mainly as an alternative to dividend payouts.

In the realm of equities and stocks, bonus shares are additional shares issued to existing investors at no extra cost. Once a bonus share is issued, you will notice more holdings of a particular company in your portfolio. However, the total value of your investments remains the same. 

Here's a quick overview of upcoming bonus shares in 2023.

 Highlights

• Bonus shares are issued free of cost.

• They are issued in particular ratios like 1:1 or 1:2 etc. i.e., shareholders get 1 bonus share for every 1, 2 or x shares held by them

• The absolute book value remains unchanged on the issuance of bonus shares. To balance this, the book value per share decreases.

• Bonus shares increase liquidity, encourage stock purchases by investors, and increase the value of investment only if the company increases the dividend payout on each share or if the share prices increase with time.

Advantages of Bonus shares:

• Helps increase liquidity

• Allows small investors to purchase share at a lesser price

• Can help investors when individual share prices surge

• Could lead to more dividend payout

Disadvantages of Bonus shares:

• Leads to shareholder dilution

• With decreased prices, the increase in share numbers might lower the demand. 

Companies to keep an eye on for bonus shares in 2023

The following companies have recently announced bonus shares:

Also Read: Stock Market For Beginners

Essential terminologies, you need to know about bonus shares:

1. Bonus Ratio: Tells you how many shares you will be “gifted” for each existing share you hold. A ratio of 1:3 means you will receive 1 share for every 3 shares you hold.

2. Record Date: This is the particular date on which the company identifies the shareholders who are entitled to bonus shares. All investors holding shares of the company on the record date are eligible for bonus shares.

3. Ex-Bonus Date: The ex-date is a date 2 days before the record date. Investors must buy the share a day before the ex-date to be eligible to receive bonus shares.

4. Cum-Bonus Price: This is the price of the stock, including bonus share values before they are issued. 

5. Ex-Bonus Price: This is the price of a stock after the value has been adjusted post-issuance of bonus shares.

6. Effective Date: The day on which the bonus shares are credited to the accounts of the shareholders. 

7. Reserves: Are profits retained by a company, not shared as dividends. Bonus shares are often issued from these retained profits. 

Click here for the latest articles on financial planning.