PosiStep 9: Corporate actions: dividend, bonus, split, buyback
Companies sometimes take decisions that change your shares: they pay dividends, give bonus shares, split their shares, buy them back or offer new ones. These are called corporate actions. This PosiStep explains each one with simple numbers.
Dividend, ex-date and record date
A dividend is cash paid per share, as an interim (during the year) or final (after the year's results) dividend. To receive it you must own the share before the ex-date. The record date is when the company checks its list of shareholders. With T+1 settlement in India, the ex-date and record date are usually the same day.
On the ex-date the share price usually drops by about the dividend amount, because new buyers no longer get that dividend. So a dividend is not free money: value moves from the share price into your bank account.
Bonus shares
In a bonus issue, the company gives existing shareholders extra shares for free. In a 1:1 bonus you get 1 new share for every 1 you hold, so 100 shares become 200.
The company is not worth more, so the share price adjusts: roughly halving in a 1:1 bonus. Your total value stays about the same; you simply hold more shares at a lower price each.
Stock split
In a stock split, each share is divided into smaller ones and the face value falls. If a ₹10 face value share splits into five ₹2 shares, 100 shares become 500, and the price becomes about one fifth.
Like a bonus, a split does not change the company's value or your total holding value. It makes each share cheaper, which can help more people buy it.
Buyback
In a buyback, the company uses its cash to buy its own shares from shareholders, often at a price above the market. Those shares are cancelled, so fewer shares remain and each remaining share owns a slightly bigger part of the company.
Shareholders can choose to offer their shares (a tender offer) or keep them. A buyback can signal that management thinks the shares are good value, but it also uses up cash.
Rights issue
In a rights issue, the company raises money by offering new shares to existing shareholders, usually at a discount, in proportion to what they hold. You can buy them, sell your right to someone else, or let it lapse.
If you do nothing, your share of the company becomes smaller, because new shares are created and others buy them.
Where PositoAI fits
The Actions tab on each company page lists its dividends (with yearly totals), bonus issues, splits, buybacks and rights issues, with ex-dates and record dates, plus any upcoming ones. The main Actions section lists recent and upcoming corporate actions across the market.
Key terms
- Corporate action
- A company decision that affects its shares: dividend, bonus, split, buyback, rights issue.
- Ex-date
- You must own the share before this date to get the dividend or bonus.
- Record date
- The date the company checks who its shareholders are.
- Bonus issue
- Free extra shares to existing holders; price adjusts, total value stays similar.
- Stock split
- Each share divided into smaller ones with a lower face value.
- Buyback
- The company buys back and cancels its own shares.
Try it
You hold 100 shares of made-up company Maple Foods at ₹600 each (₹60,000). It announces a 1:1 bonus. Just after the ex-date, what is the most likely position?
A 1:1 bonus gives 1 extra share per share held: 200 shares. The company is worth the same, so the price roughly halves to about ₹300. Total value stays about ₹60,000.
See it live on PositoAI
Open Infosys on PositoAI, click the Actions tab and find its most recent bonus issue and its dividends in the latest full year. Then open the main Actions section and look for any upcoming dividend in the market.
What this does not tell you
Bonus issues and splits do not make you richer by themselves; they change the number of shares, not the company's value. Dividends move value from the share price to cash. A buyback or rights issue tells you about a company's decisions, not whether its share is a good buy.
Quick quiz
To receive a dividend, you must own the share:
You must own the share before the ex-date. Buyers on or after the ex-date do not get that dividend.
After a 1:1 bonus, what usually happens to the share price?
The number of shares doubles but the company's value does not, so the price roughly halves.
A ₹10 face value share splits into ₹2 shares. You held 100 shares. How many now?
₹10 ÷ ₹2 = 5, so each share becomes 5: 100 × 5 = 500 shares, each priced at about one fifth.
In a buyback, the company:
A buyback uses company cash to buy its own shares, which are then cancelled.
What usually happens to the share price on the ex-date of a dividend?
New buyers no longer get the dividend, so the price typically drops by about the dividend amount.
Answer every question on this page correctly to complete this PosiStep.
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PosiCourse is for education only. It does not recommend buying or selling any share. Examples with made-up numbers are not real companies. PositoAI is for research and education only and is not investment advice.