DRP Question

[beerwm]

Just regarding Dividend Reinvestment Plans,

Are the shares bought issued by the company, like a capital raise?
or bought from the company/ or at the open market?

and what if you only have enough for example '10.5' shares, does the rest get paid out?

thanks,
just didnt quite understand the procedure, and couldnt find any posts on it

 

[cutz]

Re: DRP quesition

Hi

I'm 80% sure that DRP are stocks created by the company.

 

[white_crane]

Re: DRP quesition

It is my understanding that the shares under a DRP are 'created', i.e. new shares are issued.


With regards to the "10.5 shares" example, a number of things can happen, it all depends on the company. Some companies will:

1. pay out the remainder of any dividends - eg dividend of $25, buy 2 shares @ $10 and $5 will be direct debited to your bank account.

2. carry over the remainder to the next dividend payout - eg the spare $5 will be added to the next dividend amount you receive.

3. donate the remainder (if under a certain amount eg $10) to a charity and send you a receipt (for tax deduction purposes).

 

[craggles123]

Hi All,

Bit of a n00b question, I've joined the DRP with one of the companies im invested in and was wondering what happens with those additional shares issued to me?

I trade via Commsec, will they simply pop up on my profile?

Cheers

 

[Iggy_Pop]

Yes the quantity you gain under the DRP will pop up on your account and you should get a new Chess statement indicating the change in quantity

 

[So_Cynical]

Suncorp is the only stock i know of that is not issuing new shares for their DRP, has been buying on market for the last 2 years or so.

In my experience most stocks hold on to any money left over from the issue of DRP stocks and simply add it to the next dividend.