Dividend, Bonus and Stock Split Explained: Ex-Date, Record Date and Price

What corporate actions are

A corporate action is a decision by a company that affects its shares: paying a dividend, issuing bonus shares, splitting shares, offering rights, or buying back shares. They are announced in advance through stock exchange filings, with key dates that decide who is eligible.

Understanding them prevents common confusion, such as thinking a stock "crashed" on the morning of a split, or buying just before a dividend expecting free money.

Record date and ex-date

The record date is the date on which you must be on the company's register to receive the benefit. The ex-date is the first day the shares trade without the benefit. With India's T+1 settlement, the ex-date is generally the same as the record date, so to be eligible you need to buy at least one trading day before the ex-date.

On the ex-date, the share price is adjusted by the exchange to reflect the benefit leaving the share.

Dividends

A dividend is cash the company pays from its profits, usually stated per share. If a company declares ₹10 per share and you hold 100 shares on the record date, you receive ₹1,000 (subject to tax, which may be deducted at source above certain limits).

On the ex-date, the price usually falls by about the dividend amount, because that cash is leaving the company. So buying just before a dividend does not create free money: you get the dividend but the share is worth less, and the dividend may be taxable.

Dividend yield (annual dividend ÷ price) is a common measure for income-focused investors.

Bonus issues

A bonus issue gives existing shareholders extra shares for free, from the company's reserves. In a 1:1 bonus you get one new share for each share held. Your number of shares doubles and the price roughly halves on the ex-date, so the total value stays about the same.

Bonus issues do not create value by themselves; they change the number of shares and can make each share cheaper, which may improve liquidity.

Stock splits

A split divides each share into smaller units by reducing the face value. In a 1:5 split (for example from ₹10 to ₹2 face value), each share becomes five. If the price was ₹2,500, it becomes about ₹500 after the split, and your holding of 20 shares becomes 100 shares.

Like bonuses, splits do not change the total value of your holding. They are often done to make shares more affordable to smaller investors.

Rights issues and buybacks

Rights issue: the company offers existing shareholders the right to buy new shares, usually at a discount, in proportion to their holding. You can subscribe, sell the rights entitlement, or ignore it; ignoring it means your percentage ownership falls.

Buyback: the company buys its own shares from shareholders, often at a premium to the market price, through a tender offer or from the open market. It reduces the number of shares outstanding. Participating is optional, and only part of the shares offered may be accepted.

What this means for trading and indicators

Because adjusted charts rewrite older prices, a level you drew a year ago may shift after a split or bonus. Re-check horizontal lines and stop levels on stocks that have had corporate actions.

Indicators calculated on adjusted data are consistent, but if you compare an indicator value from an old screenshot with today's chart, the numbers may not match. Backtests should always use adjusted data, otherwise a split looks like a crash and triggers false signals.

For F&O, exchanges adjust strike prices and lot sizes of existing contracts for bonuses and splits so that positions keep the same economic value.

Why charts are adjusted

Without adjustment, a 1:1 bonus would appear as a 50% overnight fall on the chart and would trigger every stop-loss and indicator signal for no real reason. Charts and data providers therefore adjust past prices for bonuses and splits, and often for dividends, so the history stays comparable.

When comparing prices from old news articles with today's chart, remember they may be on a different basis.

A worked example

You hold 50 shares of a company trading at ₹1,800, worth ₹90,000. The company announces a 1:1 bonus and, separately, a ₹9 dividend. After the dividend ex-date the price adjusts to about ₹1,791 and you receive ₹450 (before any tax). After the bonus ex-date you hold 100 shares at about ₹895, still worth roughly ₹89,500 plus the ₹450 cash.

Nothing was gained or lost by the actions themselves. Any change in value after that comes from the market moving, not from the bonus or the dividend.

Track corporate actions on iTradeChart

The Fundamentals tab on each stock page lists recent dividends, bonuses, splits, rights and buybacks from NSE filings, along with dividend yield and company announcements. The market calendar shows upcoming results dates for stocks you follow.