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IPOs and shares

Bonus shares, dividends and right shares explained

Companies share profit with owners in a few ways. Understanding the difference helps you read announcements and avoid surprises when a price suddenly drops after a bonus.

By NEPSE Demo Trading · Updated 10 October 2026 · 2 min read

In this guide
  1. Cash dividend
  2. Bonus shares
  3. Right shares
  4. Book closure date
  5. What happens to the price?
  6. Taxes

Cash dividend

A cash dividend is money paid to shareholders from the company's profit. It is announced as a percentage of the face value of the share, so it is not the same as a percentage of your buying price.

Bonus shares

Bonus shares are extra shares given free to existing shareholders in proportion to what they hold. If a company gives 10% bonus shares, you receive 1 new share for every 10 you own. The company's value does not change, so the price adjusts downward after the bonus. Your total value stays roughly the same at the moment of adjustment.

Right shares

Right shares let existing shareholders buy new shares, usually at the face value, in proportion to their holding. It is an offer, not a gift: you pay to take it up. It raises money for the company.

Book closure date

The company announces a book closure date. To receive the dividend or bonus, your name must be on the shareholder list on that date. Because trades take a couple of business days to settle, you usually need to have bought the shares some days before. Check the announcement for the exact last date.

What happens to the price?

After a bonus or dividend, the share price is adjusted on the exchange, so a price chart may show a sudden step down that is not a real loss. This is also why EPS is adjusted when bonus shares are issued.

Taxes

Dividends and bonus shares can carry tax. The rates and who pays them depend on current law, so check with your broker or a tax professional.

For education only. Not investment advice.

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Frequently asked questions

What is the difference between a bonus share and a dividend?

A dividend is cash paid from profit. Bonus shares are extra shares given free, which increases how many you hold but lowers the price per share.

Do I get the dividend if I buy a share after the announcement?

Only if you are on the shareholder list on the book closure date. Check the announcement for the last date to buy.

Why did the price drop after a bonus?

The company's value is spread across more shares, so the price per share is adjusted down. It is not a real loss in itself.

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