When Bonus Shares are Credited in Demat Account?

The mere mention of the word ‘bonus’ can bring a smile to one’s face! While getting a bonus with your salary is something you may have heard of, did you know you can also get bonus shares when you trade in the share market? Yes, you heard that right. Bonus shares, also known as stock dividends or scrip dividends, are additional shares that are given to shareholders without any additional cost. These shares are issued by a company using its profits or reserves.

Imagine getting these bonus shares credited into your demat account. This could be a beneficial opportunity for investors, especially if the business is thriving.

Reading all about bonus shares must have left you curious to know more. Continue reading as we try to explore the basics of bonus shares and their advantages and answer the frequently asked question: when are these shares credited to your account?

What is the Bonus Shares Issue?

Let's first start with the basics. What are bonus shares? Well, most simply, these can be understood as free shares given as a ‘bonus’ to the current shareholders of a company. These are generally transferred if the company is not able to pay dividends to its shareholders. Additionally, they are willing to use their earnings or free reserve for the same.

These bonus shares are credited as per the proportionate involvement of a shareholder in the respective company.

When are Bonus Shares Credited to Your Demat Account?

Now comes the frequently asked question: when can you expect bonus shares to be credited to your account? A company determines and offers its bonus shares based on the record date to understand the total number of its shareholders at that time.

Additionally, when a company announces its bond shares issue, it also announces an ex-date. This ex-date is the deadline for buying a company's stock that determines your eligibility for bonus shares. Individuals making purchases post this ex-date don't receive any bonus shares.

Now, if you're eligible to get bonus shares, you'll be receiving the same according to your allotment date. You can see the newly added shares in your demat account post this allotment date. Further, these shares are listed on the stock change on the listing day.

Also, make sure you open demat account because this is where your bonus shares are credited. At Bajaj Broking, you can easily open a demat account in just a few minutes, that too, at low brokerage costs.

Key Advantages of Receiving Bonus Shares

Now that you know the meaning and eligibility for bonus shares, let's move ahead and explore their benefits.

Here are some common advantages of bonus shares.

Better Investment Opportunity: Investors looking to enhance their holdings often compromise as the listed stocks are comparatively on the expensive side. However, when bonus shares are announced, it reduces the stock price and enhances its number. Thus serving as a great opportunity for investors to enhance their ownership without breaking the bank.

Improved Benefits and Returns: As mentioned, bonus shares are additional shares. This means the stakeholder's stake in a company also increases with these shares. This ultimately means that if a company does well in the future, you get better returns. Additionally, individuals may also sell them in secondary markets at a higher cost bagging good profits.

Improved Liquidity: With the announcement of bonus shares, the company reduces the share costs and increases its number, splitting the prices. The lower cost and increased availability of shares, in turn, come in handy for investors looking to increase stocks in a specific company.

Who Can Issue Bonus Shares?

Companies with listings on the stock exchange are eligible to transfer bonus shares to their shareholders. Generally, these shares are awarded to individuals who choose to stay with the business for a good period. This means, if you have retained your initial stocks for a specific period, you are eligible to receive the benefits of bonus shares.

Wrapping Up

Thinking about receiving free shares in your Demat account can sound like a fantasy. However, it is important to understand the eligibility, the process, and the allotment date to avoid any kind of confusion. Investors must keep themselves aware of the record date, ex-date, allotment dates, and other important events to ensure they do not miss big opportunities. Keep yourself aware and enjoy better profits and bigger returns with bonus shares.

(No Hans India Journalist was involved in creation of this content)