Dividends Vs Bonus Shares

When a public limited company earns profit, it can either reinvest that money back into the business or share a portion of it with its shareholders.

- Rishabh Raj

This is typically done through paying dividends, or rewarding investors with bonus shares.

To receive dividends or bonus shares, investors need to be on the company's books as shareholders within the record date, which is the cut-off date to finalise who the shareholders are. Since stock market trades take a day to settle, investors need to buy the stock before the exdividend date, which is typically one business day before the record date, to be eligible for the offer.

While both corporate actions benefit shareholders, they have different roles in a shareholder's portfolio.

WHAT ARE BONUS SHARES?