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Colinco can you explain the part where you say the company would have to be pay tax at source on the script dividend - I don’t think that can be correct?
Whevever this drops I can never get a quote to buy ...not even tiny amounts like 500 ..
colinco
yes, I get your point about dilution and everyone having the same ownership as before....but... the mid term effect "could be" that SP falls ..as the earnings then have to be divided by an increasing number of shares , and the dividend costs then rise because there are then more shares to pay the next dividend out on
Centrica tried that...paid scrip dividend on recently issued scrip dividend shares ...before they knew it the share issue had increased by 6%+ and the dividend costs ballooned ...made worse on a falling earnings situation
Pokerchips, HeresHopin,
You have it round the wrong way. If I were to take up the scrip dividend then I would own a greater proportion of the company going forward than I did prior. Similarly, if I were to buy more shares in the open market using the cash dividend then I would own a greater proportion of the company going forward than I did prior. It is those shareholders who need the dividend for income whose holdings are diluted. Retaining cash is a by-product of scrip dividends. Retaining cash is never a reason for scrip dividends.
Here is an example to try to shift you both from your current thinking. Imagine a company wanted to conserve cash. Rather than issue no dividends, it decided to issue scrip dividends to all shareholders. No shareholder would then be diluted as they would hold the same proportion of the company as they did previously. However the company would have less cash as it would have had to pay tax at source on the scrip dividends.
"By taking cash and buying in the open market, you would end up in the same position as taking a scrip dividend, less stamp duty and dealing costs. "
not really.... The scrip price is 165.64p ..... I can buy today at 155p-158p (depending on timing) and recover the cash when its paid to me in mid October ..I would still be better off
Scrip dividends are "fools gold" in my opinion .... if they dont want to pay the cash, dont pay the dividend
They end up paying dividends on scrip dividends , so the cost of the annual dividend goes up , simply because there are now more shares ...so the chances of raising the dividend actually goes down
(Shell arent raising their dividend because they are spending their cash buying back scrip dividends at 40%+ more than the price they issued them at !!)
Most people can trade the dividend many times a year anyway , especially interim dividends
Pokerchips,
Scrip dividend = dividend reinvestment plan. There has to be dilution in order to differentiate between those who take cash and those who choose to reinvest. By taking cash and buying in the open market, you would end up in the same position as taking a scrip dividend, less stamp duty and dealing costs. Scrip dividend has nothing to do with whether the company can afford it or not, but instead whether the shareholder needs the income.
Why would anyone want to take a scrip dividend, when such things create dilution ....and far better would be just to take cash and buy in the open market at subdued prices ..or even subscribe to having your broker buy at a reduced broker fee
Scrip dividends always suggest that they cant really afford it but will create shares instead .... which no doubt will then be bought back at much higher prices in the future ..(like Shell is currently doing )
There are worse places to put your money unvrkw, there’s a lot of risk to future projects priced in but the company’s cash position and cash generation is good.
Hs2 is the elephant in the room. It may get cancelled like the m4 contract, but even taking that away entirely the future order book is very good.
I’m just going to sit in this for a few years and reinvest the dividends. I’m still watching fox by the way, interesting appointment, let’s see what happens next.
If the deal comes the October budget will be loaded with infrastructure and overall large sums of investment into the uk from government. A bounce is expected as we all know so getting closer to that decision making, investment moment