Royal dutch Shell Dividend Reinvestment Plan

anotherbob

As a shareholder my wife HAS received an invitation to join the Royal Dutch Shell Dividend Reinvestment Plan. Instead of receiving cash dividends she would invest in more shares in the company. Neither of us are able to judge whether this would be a good idea or not.
Currently the dividends are paid into a Nationwide savings account which is used to purchase occasional little luxuries.
I would be interested to hear views from people with some experience of such matters on how to make an informed choice.

bowlhead99

Interesting, the last I'd heard was that Shell were going to STOP their automatic SCRIP option (http://www.shell.com/global/aboutshell/investor/dividend-information/scrip.html) and that the automatic Dividend ReInvestment Plan offered by the registrars (http://www.shell.com/global/aboutshell/investor/dividend-information/drip.html) was also closed.

Perhaps one or both of those schemes are being restarted by the company or their registrars? Or perhaps following this year's changes by Shell, your broker has realised that a lot of people won't want to be forced to start getting cash dividends instead of receiving extra shares, and is writing to all of their customers who hold Shell shares to ask if they'd like to use their broker's own re-investment plan for some nominal fee? Who is your 'invitation' from?

If it is some third party you've never dealt with, beware of a possible scam where without realising it you sign over your rights to the shares and then don't receive any more dividends, which you think is normal because they're all being reinvested but then 10 years later you go looking for them and they're long gone...

Assuming it's a legitimate offer from Shell or their registrars Equiniti, or from your own trusted broker, then dividend reinvestment can be a very sensible thing to do. Instead of frittering the cash away on 'little luxuries' you would be buying more and more little slices of Shell, another share for every £22 or so of spare dividend money. Over time, those extra shares will be paying their own dividends and your investment in Shell should snowball into a bigger value, with the option of keeping it growing or opting back out of the reinvestment plan and taking a bigger income than you are today, because you have more shares paying a dividend.

Of course, whether you want more money to be invested into Shell rather than spending on your day to day cashflow needs, only you can decide! Similarly, if you take the cash and want to reinvest it for your future, you might prefer to split the new share purchases between lots of other different companies, instead of having 'all your eggs in one basket' by reinvesting into Shell all the time. Nobody can tell you whether Shell and the dividends from it will be worth more in real terms in five or ten or 20 years than it is today.

TCA

If you think the shares are good value and want to buy some more, then you buy some. If you don't want any more shares and prefer to spend the dividend on something else, then don't reinvest.

Are you buying their shares regularly or is this a holding that doesn't get added to?

Reaper

If I remember right the SCRIP only bought shares in RDSA (even if you owned RDSB) which is the undesirable Dutch version of the shares on which you would have to pay withholding tax.

anotherbob

Thanks for your observations.

planteria

you certainly want to be holding & buying the B shares.

Glen_Clark

I tried dividend reinvestment when I held paper certificates. But you get a new certificate through the post instead of a quarterly dividend in your bank account. Keeping track of the new certificates was more hassle than it was worth so I switched back to receiving dividends as cash in bank.

anotherbob

planteria wrote: »

you certainly want to be holding & buying the B shares.

Can I ask you to elaborate please? Our shares are B shares and any purchases would be more of the same.

planteria

that is good then. the A shares produce dividends which are subject to Dutch withholding tax. as a UK resident, you want B shares:)

http://www.shell.com/global/aboutshell/investor/share-price-information/difference-a-b.html

anotherbob

planteria wrote: »

that is good then. the A shares produce dividends which are subject to Dutch withholding tax. as a UK resident, you want B shares:)

http://www.shell.com/global/aboutshell/investor/share-price-information/difference-a-b.html

Understood, thanks

planteria

my pleasure