Money is not in buying and selling of stocks on intraday basis. In fact, those who made money from stock market, they hold the stock for long term and then only they saw their money growing many folds. A long term stock market investor not just gain from the appreciation in stock price but from the reserves of the listed company as well. A listed company reward its long term investors by sharing its profit in terms of dividend. apart from this, the company announces bonus shares, buyback of shares, stock split, etc. that also helps a long term investor to gain in long term.
To understand how issuance of bonus shares can change the fortunes of a long term investor, we need to look at TCS shares. This Tata group share has announced bonus shares in the ratio of 1:1 on three occasions in last 18 years and if an investor had invested ₹1 lakh in this stock 18 years ago, its shareholding would have grown eight times after these three 1:1 bonus share issues. In fact, its ₹1 lakh would have turned to ₹2.20 lakh today.
TCS bonus share history
TCS shares trade ex-bonus in 2006 when the IT giant announced 1:1 bonus shares to its shareholders. Later on, the Tata group IT company trade ex-bonus in June 2009 paying one bonus shares to its shareholders for carrying one TCS share. In Mat 2018, TCS board of directors once again rewarded its long term investors by declaring one bonus share for carrying one share of the company.
Impact of bonus shares
If an investor had invested ₹1 lakh in TCS, 18 years ago, it would have got near 833 TCS shares as one TCS share was around ₹120 around 18 years ago. After 1:1 bonus share announcement in 2006, these 833 TCS shares would have become 1,666. Again in June 2009, these 1,666 TCS shares would have become 3,332 TCS shares after issuance of 1:1 bonus share by the IT company. These 3,332 TCS shares would have further grown to 6,664 shares after issuance of 1:1 bonus shares in May 2018.
₹1 lakh turns to ₹2.20 crore
TCS share price today is around ₹3270 apiece. So, absolute value of one's ₹1 lakh invested 18 years ago would have been ₹2.20 crore. So, one's ₹1 lakh turned to ₹2.20 crore in last 18 years and 1:1 bonus shares announced thrice in this period played a major role in this huge stock return to the TCS shareholders.
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Published: 27 Dec 2022, 09:40 AM IST
I am an experienced financial analyst with a deep understanding of the stock market and investment strategies. Over the years, I have closely followed the financial markets, analyzing trends, and studying the performance of various stocks. My expertise extends to both short-term trading and long-term investing, allowing me to navigate the complexities of the financial world.
Now, let's delve into the concepts mentioned in the provided article:
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Long-Term Investing: The article emphasizes the importance of long-term investing in the stock market. It suggests that substantial gains are often realized by investors who hold onto their stocks for an extended period rather than engaging in frequent buying and selling.
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Sources of Gain for Long-Term Investors: Long-term investors not only benefit from the appreciation in stock prices but also from the reserves of the listed company. The article highlights that companies reward their long-term investors through various means, such as dividends, bonus shares, buyback of shares, and stock splits.
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Dividends: Companies share their profits with long-term investors through dividends. This is a distribution of a portion of the company's earnings to its shareholders.
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Bonus Shares: The article specifically focuses on the impact of bonus shares on a long-term investor's fortunes. Bonus shares are additional shares given to existing shareholders without any additional cost, often as a reward for their loyalty.
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TCS Bonus Share History: The article illustrates the case of Tata Consultancy Services (TCS), a prominent example. TCS has issued bonus shares in the ratio of 1:1 on three occasions in the last 18 years. The history of these bonus share issuances has significantly contributed to the growth of investors' holdings.
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Impact of Bonus Shares on TCS Investment: The article provides a detailed example of how a ₹1 lakh investment in TCS 18 years ago would have grown over time due to the issuance of bonus shares. It breaks down the process of how the initial investment and subsequent bonus share issues resulted in a substantial increase in the investor's wealth.
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Financial Performance of TCS: The concluding part of the article mentions the current share price of TCS, highlighting that the absolute value of the ₹1 lakh invested 18 years ago would now be ₹2.20 crore.
In summary, the article underscores the significance of long-term investing, explores the benefits derived from various corporate actions, and illustrates the substantial impact of bonus shares on the wealth of long-term investors using the example of TCS.
