If buying price of bonus shares is considered as nil, what will be the impact of LTCG for any bonus issues post Jan 31st '18 ?
If i have 5 shares and company declares bonus of 1 for each 10 shares, what will be outcome ?
Fractions are always paid in cash. Even if you own 100 shares and a 1:3 bonus is declared, the excess 0.33 worth will be paid in cash.
Thanks for reply. It is really good to know how it happens.
Not sure and have no facts around it , but I have seen dividend yield increase for some good management FMCG companies giving bonus…any idea if there is any link? It could be that when good companies give bonus, its for correct reasons and when reason and time is correct, the profits are more and so is the dividend…?
We are noticing that even penny stocks are going for bonus. For example Integra Essentia has announced bonus while its share price languishes at ₹6.60.
Even loss making companies declare bonus?
Then many of them declare bonus and split combined.
There is some legal or financial trick we are missing.
I think bonus shares also affect future dividend yield. This was something mentioned by Arvind Datta on twitter but I might be wrong here.
So say company had 100 public shares with share price at 100 and issue dividend of Rs 5. Then dividend yield is 5%. Now lets say die to bonus , the shares become 200. Now assuming company still has same dividend pool, it would need to divided amongst 200 shares making the yoeld 2.5%.
Let me know if this sounds correct.
The share price will also be reduced to half, so dividend yield would be 2.5 by 50 ie 5%. So no effect will happen on dividend yield due to bonus.