When investing in Hong Kong stocks through Tiger Brokers’ trading app, it’s essential to understand the different ways in which companies reward their shareholders. Two common methods are cash dividends and bonus issues. Let’s take a closer look at each one and what they mean for you as an investor.
1) Cash Dividends: What Are They?
Cash dividends refer to the payments made by companies to their shareholders in the form of cash. These payments are typically derived from the company’s current earnings or accumulated profits, and they are usually distributed to shareholders on a regular basis (quarterly, semi-annually, or annually).
When a company declares a cash dividend, it means that you, as a shareholder, will receive a payment based on the number of shares you hold. The amount of the dividend is typically expressed as a fixed amount per share, such as HKD 0.50 per share.
For example, if you own 100 shares of a company that declares a HKD 0.50 cash dividend per share, you would receive HKD 50 in cash (100 x 0.50).
2) Bonus Issue: What Is It?
A bonus issue (also known as a scrip dividend) refers to a dividend payment made in the form of additional securities (shares). Unlike cash dividends, where you receive cash, a bonus issue means that the company allocates more shares to its existing shareholders according to the proportion of shares they already own.
This method is also known as a capitalization issue because it involves converting part of the company’s reserves or accumulated profits into share capital.
For example, if a company announces a 1-for-10 bonus issue, it means that for every 10 shares you own, you will receive 1 additional share. So, if you hold 100 shares, you would receive 10 bonus shares.
Which One Should You Prefer?
Both cash dividends and bonus issues have their own advantages. Cash dividends provide immediate cash flow, which can be used for other investments or personal expenses. On the other hand, a bonus issue allows you to increase your holdings in the company without additional investment. The choice depends on your investment goals:
Cash dividends may be ideal if you seek regular income or prefer liquidity.
Bonus issues might be more appealing if you want to accumulate more shares in the company without additional capital outlay.
Conclusion
Whether you’re receiving cash dividends or bonus issues, both are important ways in which companies reward their shareholders. The Tiger Brokers app, Tiger Trade, makes it easy for you to keep track of these rewards and ensures they are credited to your Tiger Trade account. Understanding how these rewards work can help you make better-informed decisions as you build your investment strategy. By keeping track of cash dividends and bonus issues, you can maximize the benefits of your investments in Hong Kong stocks through Tiger Brokers.
