While bonus shares are largely a gimmick, DBS’ proposed issue is a boon

THE mention of a bonus sends the heartbeats of salaried workers racing. Maybe this word has the same effect with investors. 

Banking giant DBS saw its share price jump – closing up 2.5 per cent up on Feb 7 – after it announced its full-year results and proposed a bonus issue. As at Feb 28, the counter has climbed 5.7 per cent since the announcement.

With DBS – Singapore’s largest company by market capitalisation – investors are probably right to be excited over the prospects of receiving free shares.

Generally, the issuance of bonus issues may do nothing to improve a company’s valuation.

All things being equal, a company’s earnings per share (EPS) declines when the number of shares…