Scrip dividend or cash

[Cook1234]

when a company offers to pay its dividend and offers two options, scrip dividend or cash?

 

what's the pros and cons?

 

any experts on this?

[Jim]

Unless you have a huge quantity of stocks, chances are scrip dividend shares will be odd lots and rather inconvenient to dispose of. But if you love the company deep deep and intend to hold the shares till kingdom come, and the shares are trading at a price you will like to buy at, then you can save some transaction fee by getting scrip instead of cash. Also, it is easier to calculate returns with scrip dividends, since at least for me, it is hard to remember how much dividend I received over time.

[Hiton]

i agree.. unless u plan to hold for more than 5yrs or sell in odd shares, getting cash is better and easier.

odd shares market usually sell at 10-20% discount if i am correct

[Peregrine]

Actually one factor to help decide whether to opt for scrip dividend is the price set. If this is at a discount to the prevailing share price at the time decision has to be made, it makes sense to opt for scrip rather than cas, unless you expect the share price to keep falling and become lower than that price.

 

Recent examples: The set price for scrip dividend for DBS and OCBC were lower than then prevailing share prices (which unfortunately went lower in recent weeks). However that for Keppel Land was significantly higher than its then prevailing share price, so it was disadvantageous to opt for scrip dividend; better to get cash dividend.

 

Nowadays selling odd lots is less of a problem and the trading price would be quite close to price for full lots.

 

In any case it not wise to opt "permanently" for scrip dividend; wiser to make option each time.