Stock split or bonus issue: Which one is better for your portfolio?

Now it is a given that both provide for an increase in the number of shares, still both are used for distinct purposes and have varied effects on investors. Five key points are given below that can be used to understand the difference between stock splits and bonus issues better: Definition and purpose A bonus issue is the issue of free extra shares to existing shareholders, usually from the retained earnings of the company. This increases the dividend for the shareholders, and they can hope that the company has sound finances thus more investors are attracted. A stock split on the other hand is splitting the existing shares into even smaller ones. This leads to a drop in the price per share and face value, thus shares become accessible to new investors.