Wednesday, August 12, 2015

Scrips Dividend Scheme

Many high yield shares and trust (esp. REITs) offer scrip dividend scheme to the shareholders, i.e. shareholders can opt to receive shares instead of cash for their dividend. The advantage of the scheme is that shareholders can buy additional unit without paying commissions. The disadvantage is that he will have odd lot which is not easy to liquidate. To encourage shareholders to opt for scrip, companies will normally offer a small price discount to the shareholders.

I have been subscribing to scrip dividend schemes, as I normally hold my shares for very long period and don't mind to hold odd lots.

As August is the month when many companies pay dividend, I now have several "option forms" in my hand. Now with the share prices plunging last few days, a problem surfaces: Shares prices are now a few cents below the prices offered in the dividend scheme. I make me look "silly" if I opt to receive shares, since I can buy them cheaper from the market. Of course if one takes the commissions into consideration, the shares offered by scrip dividend scheme could still be "cheaper". Question is, will the share price continue to head south?

I will observe the market movement in the next few days and decide if I will subscribe to the scheme or receive cash.


Passive Income Farmer said...

Hi Sanye,

I have a few of these letters too. I think it is best to receive cash this round.


Sanye ◎ 三页 said...


Yes I think I will collect cash this time too. Take the cash and shop around in September.

Low Paul said...

Yes. Collect the cash first. U can reinvest it later when prices drop further. In the meantime u can use some to treat ur family to a good meal. :)

Sanye ◎ 三页 said...

Low Paul,

This sounds like a good idea. With the abundant dividends expected in August, we can really pamper ourselves a little.


ghchua said...

I would still take scrip for some of the more fundamentally stronger REITs which I intend to overweight in my portfolio. Examples include First REIT and Frasers Commercial Trust.

For the rest of the REITs, I will possibly take cash this time round.

CS Lim said...

I am opting for cash this time.
Cash gives you the flexibility to deploy to other counters which have more attractive valuations.

Sanye ◎ 三页 said...

Hi ghchua and CS Lim,

Thanks for sharing your decision on this. I do think that there is no right or wrong in each decision, as long as one has a basis in reaching that decision.

I am opting for cash this time round. :)