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.

• 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.

Investing in large-cap stocks via Angel One is easy. 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.

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