2d76a864_ck_Dividends__Capital_Market____s_it_to_be_wise_after_the_show
[The Convention] Buy companies that announce bonus issues and splits [The Exception] Mphasis BFL, Mastek are companies that give frequent bonuses and splits. Still these companies have lagged behind the sector leaders.
A bonus or a split has no effect on market price. A bonus or a stock split can be viewed in the same analogy as cutting a pizza into smaller pieces of equal size. This means that the quantity of the pizza as a whole remains unaltered. A bonus reduces the EPS of a company by exactly the same proportion that the number of shares are increased, the RoE and RoCE remain constant after the bonus issue.