bonus issue: meaning, definition, pronunciation and examples
C1Formal, Technical (Finance/Business)
Quick answer
What does “bonus issue” mean?
A distribution of additional shares to existing shareholders, free of charge, in proportion to their current holdings.
Audio
Pronunciation
Definition
Meaning and Definition
A distribution of additional shares to existing shareholders, free of charge, in proportion to their current holdings.
A corporate action where a company capitalizes part of its reserves by issuing new shares to shareholders without payment, thereby increasing share capital while maintaining the same proportional ownership for each shareholder.
Dialectal Variation
British vs American Usage
Differences
The term is standard in both varieties, but 'stock dividend' is a more common American term for a conceptually similar action, though technical distinctions exist (a stock dividend draws on retained earnings). 'Bonus issue' and 'scrip issue' are more frequent in UK/international financial English.
Connotations
Neutral technical term in both. No significant connotative difference.
Frequency
Higher frequency in UK, Commonwealth, and international financial reporting. In US corporate communications, 'stock split' or 'stock dividend' are more prevalent, though 'bonus issue' is understood.
Grammar
How to Use “bonus issue” in a Sentence
The company [verb] a bonus issue.A bonus issue [verb] by the board.Shareholders [verb] entitled to a bonus issue.Vocabulary
Collocations
Examples
Examples of “bonus issue” in a Sentence
verb
British English
- The company is expected to bonus-issue shares next quarter. (Rare, borderline as a verb; 'make a bonus issue' is preferred)
American English
- The corporation opted to issue a stock dividend rather than bonus-issue shares. (Very rare as verb in US)
adjective
British English
- Bonus-issue shares will be credited to your account on the 15th.
American English
- The bonus-issue proposal was detailed in the proxy statement.
Usage
Meaning in Context
Business
The board recommended a 1-for-5 bonus issue to shareholders.
Academic
The study examined market reaction to bonus issue announcements in emerging economies.
Everyday
My dad got some extra shares in his company for free—it was a bonus issue. (Simplified explanation)
Technical
The bonus issue was effected by capitalising £5m from the share premium account, issuing 2.5 million new ordinary shares of £1 each.
Vocabulary
Synonyms of “bonus issue”
Strong
Weak
Vocabulary
Antonyms of “bonus issue”
Watch out
Common Mistakes When Using “bonus issue”
- Calling it a 'bonus' (which typically implies cash).
- Confusing it with a 'stock split' (similar price effect, but different accounting).
- Using 'bonus issue' as a verb (e.g., 'The company will bonus issue shares' is incorrect; use 'make a bonus issue' or 'issue bonus shares').
FAQ
Frequently Asked Questions
They are very similar and often used interchangeably in casual discussion. Technically, a bonus issue capitalizes reserves (like share premium) and increases issued share capital, while a stock dividend is charged against retained earnings. The economic effect for the shareholder is identical.
No. Bonus issue shares are distributed to existing shareholders free of charge, in proportion to their current holdings.
Common reasons include: signalling confidence to the market, making shares more liquid and affordable by lowering the per-share price, capitalizing reserves to reflect the company's accumulated earnings in its share capital, and conserving cash instead of paying a cash dividend.
The share price is adjusted downward on the ex-bonus date to reflect the increased number of shares. For a 1-for-1 issue, the price would theoretically halve, so the total market capitalisation of your holding remains the same.
A distribution of additional shares to existing shareholders, free of charge, in proportion to their current holdings.
Bonus issue is usually formal, technical (finance/business) in register.
Bonus issue: in British English it is pronounced /ˈbəʊ.nəs ˌɪʃ.uː/, and in American English it is pronounced /ˈboʊ.nəs ˌɪʃ.uː/. Tap the audio buttons above to hear it.
Phrases
Idioms & Phrases
- “It was a bonus issue all round. (Figurative, rare: meaning an unexpected benefit for everyone involved)”
Learning
Memory Aids
Mnemonic
Think of a 'bonus' as something extra you get for free. A 'bonus issue' is like a company giving its loyal shareholders a free extra helping of shares.
Conceptual Metaphor
SHARES ARE A PIE / REWARD. The company is slicing the existing pie into more, smaller pieces (shares) and giving them to the current pie-owners (shareholders) as a reward.
Practice
Quiz
What is the primary financial effect of a 1-for-1 bonus issue on a shareholder's wealth?