Script dividend - what to do?

[Bluepica]

I'm new to this... got a turquoie color paper from Noble Group, what what script dividend and need to response... what should I do ah? Whole paper is wordings, read until I

[Zangetsu77]

I'm new to this... got a turquoie color paper from Noble Group, what what script dividend and need to response... what should I do ah? Whole paper is wordings, read until I

 

Dividends can either be paid in cash or scrip. Scrips became a lot more popular last year during the financial crisis, as companies faced a cash crunch.

 

Basically scrip dividend means you get more shares in-lieu of the cash, and typically at a discount.

 

Means to say, assuming the dividend for counter A is say S$0.10 per share, you could opt to receive S$0.10 per share in cash or more shares. Of course, scrip dividend may be more worthwhile if issued at a discount to the market price, and the company is fundamentally solid and growing. You receive liquid shares as dividend, and you can liquidate it in the open market for more cash.

 

I'm don't follow Noble, though it would be useful to understand what is the dividend issued (i believe quite large this round), and for the scrip, at what issue price for the share? What is the last traded price for the share? More worthwhile to take cash or shares? Off-hand i suspect it's shares (i.e. scrip) la for Noble.

[Zangetsu77]

I'm new to this... got a turquoie color paper from Noble Group, what what script dividend and need to response... what should I do ah? Whole paper is wordings, read until I

 

Also, there should be a reply slip. Do fill up and send back to Noble's corporate secretarial service provider. And if you don't, you should be accepting some default option (which should also be stated in the reply slip).

 

This quite standard stuff for companies which offer scrip dividends.

[Dwoon]

Wouldn't that also mean dilution since company issues more shares???

[Chewbacca]

It's called scrip dividend? Sounds exactly the same as splitting a stock.

 

They say "for 3 shares we will give you 1. And offer it at, say, $1, instead of the $1.20 worth of each stock after split."?

 

Something like that?

 

Anyway, if it's below market price, always get them.

[Throttle2]

Anyway, if it's below market price, always get them.

 

Not necessarily.

[Bluepica]

Thanks bro :)

[Vooth]

Dividend payable is S$0.050447 per share. Just take the cash lah, you reinvest only get odd lots wanna dispose also troublesome.

[Freestylers09]

i rather take shares...

 

unless got 200-300lots..then ard 10k cash..if not 10 lots is like 500+??

 

and i love split shares..so far my counters i had 1 is from 1 to 10 now..never go see how splitted ..but splitted quite a number of times...but value now is same as the one i bought b4 it splitted..hahahaha

 

just my preference :)

[Vooth]

Depends on what shares bro, my keppel corp shares split 1:2 worth it....my wife's jasper shares give lousy rights and then consolidate and ended up losing a big chunk and now still paper loss pui!

[Freestylers09]

true also..

 

Hmm..Jas v familiar in the 2006 big rally period...

[Zangetsu77]

Should assess the company. Small company with cash flow problems, typically prefer shareholders to take scrip. But it's worthless paper even if the paper value of the scrip is more than the little cash they pay.

Edited June 4, 2010 by Zangetsu77

[1fast1]

Here are the considerations I use in deciding whether to take the money or take the scrip:

 

1) Growth potential of the company - if it's a stable, good company with excellent prospects, go for scrip.

 

2) Current market performance - if market is bullish, there's excellent upside, and the scrip is usually at a good discount. If market is very bearish, then it may not be such a great deal because even if the scrip is at a good discount compared to current market rate, there's a good chance that waiting will get you stock at an even cheaper price. I might go for cash in this instance.

 

3) Odd-lot considerations - unless you own lots of stock in a company, it's highly likely that your scrip issue is going to come in an odd lot, e.g. 15 shares, as opposed to round lots, which come in multiples of 1000 (which constitutes a lot in most cases). Odd lots often trade for less than the market rate (because they are more difficult for brokerages to offload). I recently had a dividend issue, where I elected to take cash because of this consideration.

 

4) Tax considerations - dividends are taxable, capital gains are not. Usually not a big deal for a retail investor, but could be lots of difference for the big fish. Sadly, I am nowhere near a big fish.

 

5) Cashflow - almost never a concern for most people who play sensibly with stocks, but if you're in a slight liquidity crisis (i.e. not enough to make you sell the stock itself), take the cash dividend to ease the burden.

 

Well, those are my two cents'. Your mileage may vary, so decide for yourself.

Edited June 4, 2010 by Turboflat4