Bonus Issue

intermediate

7 min read

Updated 2026-07-13

Reviewed by SST Editorial

A bonus issue (also called a stock dividend) is a corporate action where a company issues additional free shares to existing shareholders. This is done by capitalizing the company's retained earnings or share premium reserves. While the total number of shares increases, the share price drops proportionally, keeping the overall market value of the company and individual holdings unchanged.

Key Takeaways

01.Free additional shares issued to shareholders without cash outlay.
02.Funded by transferring reserves to share capital (capitalization of reserves).
03.Reduces share price, making it more affordable and liquid for retail investors.
04.Does not change the company's fundamental market capitalization or equity value.

Why it matters

Bonus issues signal that a company has healthy reserves and is willing to restructure its capital base to support liquidity, which is highly popular in retail-heavy markets like Bursa Malaysia.

Common Mistakes

Confusing bonus shares with free wealth

A bonus issue does not create cash or value. If you receive 1 new share for every 1 you own, the share price will halve. Your total value remains identical.

Command Palette

Key Takeaways

Why it matters

Common Mistakes

Confusing bonus shares with free wealth

Further Reading