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ITC bonus shares: A successful stock market investor often found advising its followers to hold a stock as long as one can. The basic motto behind this advise is to minimise the risk and open some other sources of income that a long term equity investor enjoys over the short term investors. Other than stock price appreciation, a long term investor gets benefit of share buyback, bonus shares, dividend, etc. that a listed company announces from time to time.
To understand how these other sources of income can impact a long term stock market investor’s return we need to look at ITC share price history. The stock has given bonus shares three times in last two decades. In these two decades time, ITC share price has ascended from around ₹14.50 to ₹331.50 apiece levels, appreciating to the tune of near 23 times. However, if we consider three bonus shares issued by the company in the last 20 years, the ITC share price appreciation would come around 102 times. So, these three bonus shares issued by the FMCG company increased its long term investors return by more than 4 times.
ITC bonus shares detail
As per the information available on BSE website, ITC has announced bonus shares on three occasions in last twenty years. It has given bonus shares in the ratio of 1:2 in September 2005, which means an investor was given one bonus shares for holding two shares of the company. In August 2010, ITC again gave bonus shares in 1:1 ratio, giving one bonus shares for each ITC share held by the shareholder. Later on in July 2016, ITC announced bonus shares in 1:2 ratio.
Bonus shares impact on shareholders
If an investor had invested ₹1 lakh in ITC stocks around 20 years ago in the month of June, it would have got one ITC share at around ₹14.50 apiece. So, by investing ₹1 lakh in ITC stocks in June 2002, one would have got 6,896 ITC shares. After 1:2 bonus shares issue in September 2005, the total number of ITC shares of the shareholder would have turned to 10,344 (6,896 x 1.5). Likewise, these 10,344 ITC shares would have turned to 20,688 after the issuance of bonus shares in 1:1 ratio in August 2010. When the FMCG company announced 1:2 bonus shares in July 2016, these 20,688 ITC shares would have surged to 31,032 ITC shares.
So, an investors shareholding in ITC would have surged from 6,896 to 31,032 if the investor had invested ₹1 lakh in the scrip paying ₹1 lakh in June 2002.
₹1 lakh turns to ₹1.03 crore
On Friday session, ITC share price closed at ₹331.50 apiece levels on NSE. So, net worth of ITC shareholding of an investor who invested ₹1 lakh in ITC in June 2022 had gone to ₹1.03 crore ( ₹331.50 x 31,032). In case, the company had not announced any bonus share in this period, an investors ₹1 lakh would have turned to ₹23 lakh as the stock surged around 23 times in last twenty years (331.50/14.5).
Hence, bonus paying shares have a capacity to tune a millionaire into a billionaire in long term.
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(This story has not been checked by Kashmir Bulletin and is auto-generated from other sources)
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