A bonus issue is distribution of additional shares to the existing shareholders of the company at zero cost. The bonus shares are issued in proportion to the existing holdings by the shareholders. To be eligible for bonus, an investor should hold the shares of the issuing company as on record date.
The bonus shares benefits the shareholders in long term. It increases the shareholding of the shareholders at no additional cost which can help earn additional dividend whenever announced. Issue of bonus shares reflects positive financial health of the company. The investors should analyze the company's track record and future prospects to decide to invest in a company for bonus.
