S2 E2 : WHAT ARE DIVIDENTS, BONUS SHARES, SPLITS ?
🍩 Imagine You Own a Doughnut Shop
You started a doughnut shop with 10 friends.
Everyone gave some money and became a part-owner.
The shop makes good profit.
Now the question is:
"What should we do with the profit?"
You have 3 options:
💸 1. DIVIDEND – Sharing the Profit
A dividend is when a company gives you part of its profit — in cash.
🧠 Real Example:
Suppose HDFC Bank earns ₹10,000 crore in profit this year.
They decide to give ₹1,000 crore to shareholders.
So if you own 100 shares, they might give you ₹20 per share = ₹2,000 in your bank account!
No work, no sell — just reward for holding shares.
🎉 It’s like the company saying:
“Thanks for trusting us. Here’s your share of the cake.” 🎂
🎁 2. BONUS SHARES – Free Shares
Bonus shares are extra shares the company gives you — for free.
🎯 Why?
To reward loyal investors without spending money.
🧠 Real Example:
Let’s say you have 10 shares of Infosys.
They declare a 1:1 Bonus.
That means — for every 1 share, you get 1 more.
So now, you’ll have 20 shares!
💡 The price of each share may drop (to keep the value same),
but you now hold double the shares.
🔪 3. STOCK SPLIT – Cutting the Share into Smaller Pieces
A stock split is when 1 expensive share is split into 2 or more cheaper shares.
🧠 Real Example:
Suppose Tata Motors share is ₹1,000.
They declare a 2:1 split.
Now:
- 1 share becomes 2 shares
- Each share becomes ₹500
Your total value stays the same — but now more people can afford to buy it.
🥧 It’s like cutting a big pizza into smaller slices so everyone can enjoy.
🧠 Summary Table:
Dividend
📌 What happens: You get cash
🎯 Why it’s done: To share company profit with shareholders.
Bonus Shares
📌 What happens: You get free shares
🎯 Why it’s done: To reward shareholders.
Stock Split
📌 What happens: Existing shares are divided into smaller parts
🎯 Why it’s done: To make shares more affordable for investors.
💡 Does This Affect You?
YES!
📈 More bonus shares = more chances to grow when price rises
💰 Dividends = extra income
🔪 Stock splits = more people can buy, so price can rise in future
This is free benefit just for being a shareholder!
🧠 Recap (Like Homework but Fun)
✅ Dividend = Free cash from company profits
✅ Bonus Shares = Free extra shares
✅ Stock Split = 1 big share → 2 smaller shares
✅ Total value remains same — but benefits increase
✅ Real companies like Infosys, Tata, HDFC do this regularly
✅ You just need to hold the shares to get these rewards
🎉 You’re now one step deeper into the world of investing!