Difference Wiki

Bonus Shares vs. Stock Dividend: What's the Difference?

Edited by Sawaira Riaz || By Sara Rehman || Published on December 2, 2023
Bonus shares are additional shares given to shareholders at no cost, increasing share count but not value; stock dividends distribute additional shares as a dividend, often optional and taxable.

Key Differences

Bonus Shares are issued by companies to their shareholders from the company's accumulated earnings. They increase the total number of shares while maintaining the shareholder's proportionate ownership. Stock Dividends, conversely, are dividends paid in the form of additional shares rather than cash, reflecting a company’s desire to reward shareholders without reducing its cash reserves.
Sara Rehman
Dec 02, 2023
Stock Dividends can be offered as a choice to shareholders, who may opt for cash dividends or additional shares. These dividends can sometimes have tax implications for the shareholder. On the other hand, Bonus Shares are automatically given to the shareholders and typically don't have immediate tax implications, as they are considered a re-investment of company profits.
Sara Rehman
Dec 02, 2023
Bonus Shares result in a reduction of the company's reserves, as they are issued from retained earnings or share premium account. This issuance dilutes the share price but not the percentage ownership. Stock Dividends, however, are more like a dividend payout, where a company uses its profits to issue additional shares, which can affect the market perception of the company's profitability.
Sawaira Riaz
Dec 02, 2023
In the case of Stock Dividends, shareholders receive additional shares based on the proportion of their current holding. This distribution can sometimes be fractional. Bonus Shares, in contrast, are typically issued in a fixed ratio to the shares already held, such as 1:10, giving one additional share for every ten held.
Harlon Moss
Dec 02, 2023
While Bonus Shares are generally seen as a sign of company confidence and a reward for loyalty, Stock Dividends offer a flexible way for a company to manage its cash flow while still providing a return to its shareholders. Both impact the company’s share structure but in slightly different ways.
Janet White
Dec 02, 2023
ADVERTISEMENT

Comparison Chart

Source of Issue

Retained earnings or reserves
Profits allocated as dividends
Sara Rehman
Dec 02, 2023

Impact on Shareholder Equity

Increases total share count
Optionally increases share count
Sara Rehman
Dec 02, 2023

Tax Implications

Generally none at issuance
May be taxable, depending on choice
Sara Rehman
Dec 02, 2023

Purpose

Reward loyalty, retain profits
Distribute profit without cash outflow
Harlon Moss
Dec 02, 2023

Typical Method of Distribution

Fixed ratio to existing shares
Proportional to current shareholding
Aimie Carlson
Dec 02, 2023
ADVERTISEMENT

Bonus Shares and Stock Dividend Definitions

Bonus Shares

Bonus shares increase share count without additional investment.
The bonus share issuance doubled my number of shares in the company.
Sawaira Riaz
Nov 24, 2023

Stock Dividend

Stock dividends are an alternative to cash dividends.
Opting for the stock dividend, I received shares instead of cash.
Sara Rehman
Nov 24, 2023

Bonus Shares

Bonus shares are a method of capitalizing company earnings.
My portfolio's value remained the same after the bonus shares were added.
Sara Rehman
Nov 24, 2023

Stock Dividend

Stock dividends distribute company profits as shares.
The 5% stock dividend added several shares to my investment.
Sara Rehman
Nov 24, 2023

Bonus Shares

Bonus shares are additional shares issued to shareholders for free.
The company issued 1 bonus share for every 5 held, increasing my holdings.
Sara Rehman
Nov 24, 2023

Stock Dividend

Stock dividends can be fractionally distributed.
The fractional stock dividend increased my shares by 2.5%.
Aimie Carlson
Nov 24, 2023

Bonus Shares

Bonus shares are a reward to shareholders from retained earnings.
Receiving bonus shares was a pleasant surprise, reflecting the company's profitability.
Sara Rehman
Nov 24, 2023

Stock Dividend

Stock dividends offer shareholders a reinvestment option.
I chose stock dividends to grow my holdings in the company.
Janet White
Nov 24, 2023

Bonus Shares

Bonus shares are given to existing shareholders proportionately.
Owning 100 shares, I received 10 bonus shares in the recent issuance.
Sara Rehman
Nov 24, 2023

Stock Dividend

Stock dividends are dividends paid in the form of additional shares.
The company's stock dividend option allowed me to increase my shareholding.
Sawaira Riaz
Nov 24, 2023

FAQs

What are bonus shares?

Bonus shares are additional shares given for free to existing shareholders.
Sara Rehman
Dec 02, 2023

How are bonus shares different from stock dividends?

Bonus shares are issued from reserves, while stock dividends are a profit distribution.
Sara Rehman
Dec 02, 2023

Are stock dividends taxable?

Stock dividends may be taxable, depending on the shareholder’s choice and jurisdiction.
Harlon Moss
Dec 02, 2023

Why might a company offer stock dividends?

To distribute profits without reducing cash reserves.
Sara Rehman
Dec 02, 2023

What is a stock dividend?

A stock dividend is a dividend paid in the form of additional shares.
Sawaira Riaz
Dec 02, 2023

Do bonus shares affect share price?

Yes, they can dilute the share price but not ownership percentage.
Janet White
Dec 02, 2023

Why do companies issue bonus shares?

To reward shareholders and capitalize retained earnings.
Sara Rehman
Dec 02, 2023

Can I opt out of receiving stock dividends?

Yes, if the company offers a choice between stock and cash dividends.
Aimie Carlson
Dec 02, 2023

How does offering stock dividends benefit a company?

It maintains shareholder satisfaction while conserving cash.
Harlon Moss
Dec 02, 2023

Are bonus shares taxable?

Usually, bonus shares are not taxable at issuance.
Harlon Moss
Dec 02, 2023

What happens to my percentage of ownership with bonus shares?

It remains the same, as all shareholders receive proportional shares.
Sara Rehman
Dec 02, 2023

Are bonus shares a sign of company profitability?

They can be, as they are issued from retained earnings.
Sara Rehman
Dec 02, 2023

How are bonus shares calculated?

They are typically issued in a fixed ratio to existing holdings.
Aimie Carlson
Dec 02, 2023

Do stock dividends change the market value of holdings?

They may change the market value depending on market perception.
Harlon Moss
Dec 02, 2023

How does issuing bonus shares benefit a company?

It signals confidence and can retain cash within the company.
Harlon Moss
Dec 02, 2023

Does a stock dividend dilute my ownership?

No, as all shareholders receive additional shares proportionately.
Sara Rehman
Dec 02, 2023

How is a stock dividend ratio determined?

It’s usually a percentage of the current holdings.
Harlon Moss
Dec 02, 2023

Can I sell bonus shares immediately?

Yes, once issued, they can be sold like regular shares.
Aimie Carlson
Dec 02, 2023

Is a stock dividend better than a cash dividend?

It depends on the shareholder’s investment strategy and needs.
Harlon Moss
Dec 02, 2023

Can I convert stock dividends to cash?

Yes, by selling the additional shares received as dividends.
Aimie Carlson
Dec 02, 2023
About Author
Written by
Sara Rehman
Sara Rehman is a seasoned writer and editor with extensive experience at Difference Wiki. Holding a Master's degree in Information Technology, she combines her academic prowess with her passion for writing to deliver insightful and well-researched content.
Edited by
Sawaira Riaz
Sawaira is a dedicated content editor at difference.wiki, where she meticulously refines articles to ensure clarity and accuracy. With a keen eye for detail, she upholds the site's commitment to delivering insightful and precise content.

Trending Comparisons

Popular Comparisons

New Comparisons