Royal Mail DRIP?

henrygregory

Hi there, I am a loyal Royal Mail shareholder who has held onto my shares since the IPO date earlier last year. I got 227 shares with a value at the time of £749.10.

Recently Equiniti (the platform used to manage the shares) contacted me to ask me if I was interested in the Dividend Re-Investment Plan on offer by Royal Mail. I don't intend on cashing my shares out quite yet, and would like to hang on to them for at least another two years.

Does anyone have some advice on whether it would be worthwhile me considering the DRIP and increasing the shares I hold, or should I take the cash.
How can I calculate what return I will receive as a dividend?

Any help would be great!

bowlhead99

If you are happy to hold your £1k+ of Royal Mail shares for a few years and are comfortable with the risk of that, I don't see a particularly strong reason to have them pay you the dividends in cash.

Getting a few tenners worth of cash on dividend day is not something you are going to be able to go out and do something life changing with. If you had £10k+ of RM shares then the dividend is a bit more meaningful. But with your minimum holding it's not much of an annual windfall and presumably you don't have any great need for the cash.

Some people with proper investment portfolios will collect together the dividend receipts over a month or a quarter or a year and look to reinvest them into a new addition to the portfolio or top up one or more of their other existing holdings to rebalance what they own between companies and funds.

However, for people who only have a few directly-held shares here and there (e.g. a minimum amount of RMG), they probably don't have much planned for the cash and might as well receive it as shares instead through the reinvestment program, as long as program doesn't have high fees relative to what is being reinvested. If you reinvest in this way, it is not known what your future dividends and sale proceeds will be, but they will be a few percent higher than if you hadn't reinvested, by the ratio of divs reinvested over total current value.

Presumably you think there is value in holding Royal Mail for the next couple of years, in terms of price rises or dividends, or you would sell the ones you have. If you are not selling you might as well forego the cash dividend and reinvest the few pounds of divs. It is hardly going to increase your risk very much because it's only a small amount of money. But these small amounts of money reinvested could produce something a bit more meaningful the longer they are left.

vectistim

I haven't looked at the DRIP forms properly yet, but given the piddly holdings we all have (unless people have bought more), will they be carrying over leftover bits of dividend for the next purchase opportunity?

Ken68

Depends what they charge Henry. I binned mine, it read like a scam.

vectistim

Answering my own question any balance is apparently carried forward:
http://www.royalmailgroup.com/sites/default/files/DRIP%20Explanatory%20Booklet.pdf

C_Mababejive

TDW and many other platforms operate DRIPS on your behalf. I think TDW is a very good deal,,is it £1.50 per stock ? Anyway yes,I'm all for DRIPs

bigadaj

Isn't the minimum charge set at a high level if you have the standard allotment of shares?

I think it works out at 5% or more so I'm just going to take the cash.

Compounding may be good but not if the charges for doing so are high.

Daniel54

bigadaj wrote: »

Isn't the minimum charge set at a high level if you have the standard allotment of shares?

I think it works out at 5% or more so I'm just going to take the cash.

Compounding may be good but not if the charges for doing so are high.

Minimum charge is £1.50 or 5%

So minimum will apply for the standard allotment

Doesn't seem extortionate

bigadaj

Daniel54 wrote: »

Minimum charge is £1.50 or 5%

So minimum will apply for the standard allotment

Doesn't seem extortionate

Seems pricey to me, remember the days when funds took a 5% initial charge looks extortionate now.

I really only bought in on the fact that it definitely looked cheap and was going to sell early but turned out I've got a cgt charge for the last tax year so held on to save the hit.

Will sell in the near future, the business just doesn't look good to me, save for the windfalls from property that could be a short term boost.