A debenture is just a fancy word for a bond. A bonus debenture is issued by a company free of charge to qualifying shareholders. So the share holders will get paid a fixed interest rate over time and eventually the debenture will mature and be able to be redeemed for face value.
Some companies do this instead of paying a dividend. A dividend is just cash immediately paid out. However, a bonus debenture can take that cash and turn it into debt, keeping those dollars on their books.
For example, say I owe you $1,000 in dividends. I could just write you a check for $1,000. Or I could issue you a $1,000 bonus debenture with a 10 year term at 4% interest. That means I’ll pay you $40 per year for the next 10 years, and when the 10 years is up, I’ll pay you the $1,000 to satisfy the debenture. This is to my advantage, because now I only paid you $40 this year in interest and I still have $960 to invest (presumably at a rate of return that is more than 4%).
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