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Hi Mike,
The definition of Scrip Dividends are dividends paid by the issue of additional shares.
Does it mean additional shares have been given out for free in proportion to the share already held. Thank you.
Yes, ok, but not in the same way as a bonus issue
Imagine that you’re a shareholder (1,000 shares) and the company declares a dividend of 2 cents per share
You may ask yourself “What do I need $20 for immediately or should I reinvest it?”
If you have no immediate pressing need for $20, and if the company has offered the opportunity to take the dividend as a scrip issue, you may elect to receive that dividend in the form of shares instead of in cash
The number of shares is calculated as (your) $20 / market value of the shares at the date the shares are quoted ‘ex div’ on the stock market
OK?
Hi Mike,
Thank you for the explanation.
Is is like extra cash bonus given by the company as a freeholder, and if you decide to reinvest the money, it will be recalculated based on the market value of the shares at the date shares are quoted? Thanks.
What’s a freeholder?
Say the company paid all shareholders their dividends in cash
So you, to continue with the previous numbers, receive $200
Now you wish to invest that $200 back into the company’s shares
An unnecessary pain, agreed?
So instead, the company offers you the opportunity to short-cut that procedure by issuing shares to you instead of paying you cash
OK?
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