Bonus Issue
A bonus issue, also known as a scrip issue or a capitalization issue, is an offer of free additional shares to existing shareholders. For example, a company may give one bonus share for every five shares held. Companies issue bonus shares to attract further investment and reward shareholders.
Dividend Distribution
Definition: Dividend distribution, also known as dividend payout or capitalization distribution, is a method by which a company provides additional shares to its existing shareholders for free. For example, a company might distribute one bonus share for every five shares held. Companies distribute dividends to attract more investment and reward shareholders.
Origin
The concept of dividend distribution originated in the early joint-stock company system, where companies began issuing dividends in the form of shares to reward investors. Over time, this practice evolved into a common corporate financial strategy, especially when companies wish to retain cash flow.
Categories and Characteristics
Dividend distribution mainly falls into two categories: cash dividends and stock dividends. Cash dividends involve direct cash payments to shareholders, while stock dividends involve issuing additional shares to shareholders. The advantage of cash dividends is that shareholders receive immediate cash benefits, but the downside is that the company depletes its cash reserves. The advantage of stock dividends is that the company retains its cash flow while increasing shareholders' equity, but the downside is the potential dilution of earnings per share.
Specific Cases
Case 1: A tech company announced at its annual shareholders' meeting that it would distribute stock dividends at a ratio of one share for every ten shares held. This move not only increased shareholders' equity but also boosted their confidence in the company.
Case 2: A traditional manufacturing company decided to distribute cash dividends, paying 0.5 yuan per share. This decision was well-received by shareholders as they could immediately benefit from the cash payout.
Common Questions
1. Does dividend distribution affect stock prices?
Yes, dividend distribution typically leads to stock price adjustments. For example, after a stock dividend distribution, the stock price will be adjusted downward to reflect the impact of the additional shares.
2. Are dividends subject to taxation?
In most countries, dividend income is taxable, but the specific tax rates and regulations vary by country.
