Bonus Shares

Bonus shares, distributed to existing shareholders at no extra cost, can signal company strength or strategic decisions. Before investing, understand

Bonus shares, distributed to existing shareholders at no extra cost, can signal company strength or strategic decisions. Before investing, understand the rationale behind bonus issues and their impact on earnings, ownership dilution, and market sentiment. A thorough analysis of company fundamentals is crucial. Angel One facilitates bonus stock investment effortlessly. Bonus shares can enhance liquidity and investor interest but may dilute ownership and impact earnings per share. While generally beneficial, investors should consider these factors to make informed decisions. Knowledge of bonus share dynamics ensures investors navigate this aspect of the market effectively for potential gains.

Company	LTP	Bonus Ratio	Announcement	Record Date	Bonus Date

What Are Bonus Shares?

Bonus shares are extra shares given to the current shareholders by the company at no additional cost. These shares are given based on the number of shares that a shareholder owns. Bonus shares are the accumulated earnings of the company, which are converted into free shares and distributed instead of dividends.

Things To Consider While Analysing Bonus Shares

Reason for bonus issue: As an investor, you must know the reason behind issuing the bonus shares. Companies issue bonus shares for several reasons like to improve liquidity, increase market capitalisation or reward shareholders. Knowing the reason may help you analyse the position of the company.
Impact on earnings: Issuing bonus stocks can impact the earnings of the company as it increases the number of outstanding shares without any change in the underlying earnings of the company. This can result in the dilution of Earnings Per Share (EPS), which can impact the stock price. Therefore, analyse how the bonus shares can impact the earnings and future growth potential of the company.
Dilution of ownership: The issuance of bonus shares can dilute the ownership. After the issuance, the existing shareholders will own a smaller percentage of the company, which can impact the voting rights and control of the company. So know how the issuance of bonus shares may impact the ownership structure.
Market reaction: Know the market reaction after the issuance of bonus shares. The reaction can be a positive one or a negative one. Based on this reaction, the stock price may be impacted.

How To Invest in Bonus Stocks?

If you want to buy stocks of companies that are planning to announce bonus shares, you can do so via Angel One. Simply follow these steps:

Log in to your Angel One account.
Click on the search icon and look for your desired dividend stock.
Now, place your buy order. Simply click on the ‘Buy’ button, enter your desired quantity, and select the order type.
To complete your transaction, click on the ‘Buy’ button.

If you don't have a Demat account with Angel One, you can open one for free online within minutes.

FAQs

Is bonus shares a benefit for investors?

Bonus shares can be beneficial for investors as they increase the number of shares without additional cost, enhancing liquidity and potential investor interest.

What are the risks of bonus shares for an investor?

Usually, from an investor’s point of view, there is not much of a disadvantage to owning bonus shares. However, investors should note that after receiving additional shares, the earnings per share (EPS) remains the same while only the number of shares increases.