aviva scrip dividend scheme

herbalrems

Just had some blurb from aviva concerning the shares I hold, not many, just the freebees when norwich union gave them out. Should I continue to recieve dividends into my bank, recieve more shares instead? Any ideas on the pros and cons of both? Plus what would the tax implications be? I am just an ordinary bloke, with no real financial knowledge, so please excuse if this is a naff question!

Pal

Tax implications are the same. The only difference is you are buying new shares with the dividend money instead of being given the cash. The question is, do you want more shares in aviva? If the answer is yes, why are you not buying them anyway? Why wait for a dividend to be paid out?

I would take the money myself. As you received the shares for free, the dividend money essentially gives you an infinite investment return, which isn't too shabby ;D

cloud_dog

herbalrems

I have also held Aviva shares since NU float. For a number of years now I have been taking the divi in the form of shares (this was via their Dividend Re-Investment Plan DRIP, and now they are replacing that with a SCRIPT scheme - much the same I think it merely alters how Aviva source the shares, i.e. from the market or just create new ones).

I'm assuming you don't really need the divi money.

There are a couple of reasons why I take the shares:

a) It is acknowledged that investments grow much better if divi's are re-invested, i.e. you acheive compounded dividend payments as the years go by (divis on the shares your re-investment purchased)
b) Everyone needs exposure to equities
c) Aviva is considered to be a fairly good / strong company within the life / insurance sector
d) As you say the numbers of shares we hold are not huge and I don't need the divi's or the capital

I am *now* a slightly older / more experienced investor and hold my Aviva shares for the long term (as part of a diversified portfolio) and whilst the £1300 of capital and the £30 - £40 of divi (p.a.) is nice it's not really life changing. So I have decided, as Aviva is considered a reasonably good company, to tuck the shares away, re-invest my divi's and hopefully in a few years time they will be worth comparatively more.

Either way I don't think you can loose out too much as they were free ;-)

cloud_dog

fredsnail

Just received blurb from Aviva about receiving shares instead of dividends.

In the current climate which is the best option - to continue receiving dividends as cash or to receive shares instead?

Thanks

fs

astont

I've got he same blurb. I think its a bit misleading on page 3 where it states "...to receive new Ordinary Shares of 25 pence each instead of cash dividends". For a moment, I thought I was in for buying shares at 25p instead of a dividend cheque.

I've watched the shares go from 860p to 160p in the last 3 years, so the cheque sounds favourite.

mrposhman

It is a SCRIP not a SCRIPT dividend firstly (not to OP).

Its a personal decision really.

If you take the scrip
- You will not have to pay income tax on the dividend
- You may have to pay CGT on the sale proceeds if and when you sell them
- If you feel the share will rise back towards its previous highs, then the scrip will be priced at a low rate (average of I think 26th - 31st March)
- As has been said above, reinvesting shares generates a compunding of the dividends received which massively outperforms cash in the long run (funnily enough, those that argue the other way ignore compunding usually)

If you take the cash
- You will probably need to pay income tax

Its really a personal decision but just to throw my hat in. I'll be taking it as scrip rather than the £400 odd £ I would have received as I think the compounding rate over a number of years will be far better than what the £400 will do for me, and I also think the share will rise as the economy recovers (if you don't believe me, check out Avivas historical chart, I think it closely follows what the FTSE does)

jem16

mrposhman wrote: »

If you take the scrip
- You will not have to pay income tax on the dividend

You may if you are a higher rate taxpayer.

mrposhman

jem16 wrote: »

You may if you are a higher rate taxpayer.

on the scrip even though its not cash? Its not cash to come in for income so where would you put it on your tax return?

Surely by moving it into shares and never seeing the cash this wouldn't incur income tax but may incur capital gains tax?

gozomark

cloud_dog wrote: »

There are a couple of reasons why I take the shares:

a) It is acknowledged that investments grow much better if divi's are re-invested, i.e. you acheive compounded dividend payments as the years go by (divis on the shares your re-investment purchased)
b) Everyone needs exposure to equities
c) Aviva is considered to be a fairly good / strong company within the life / insurance sector
d) As you say the numbers of shares we hold are not huge and I don't need the divi's or the capital

a. well unless dividends go negative, that must be true - you might as well say the more you invest, the bigger your portfolio will be
b. why ?

clairbear_3

The Scrip Div is priced at 227.35p with the shareprice currently 251 this is a good deal although the shareprice could fall by the 24th April I believe the last day to participate subject to shareholder approval 29 April
CB

mrposhman

clairbear wrote: »

The Scrip Div is priced at 227.35p with the shareprice currently 251 this is a good deal although the shareprice could fall by the 24th April I believe the last day to participate subject to shareholder approval 29 April
CB

Not bad. That'll be a nice 8.7% increase in the number of shares then.