Reinvesting dividends in the UK: best platforms?

EdGasket

george4064 wrote: »

Yes, scrip dividends can only occur with shareholders who hold paper certificates or hold the shares directly with the company/registrar.

Majority of shareholders hold via platforms, and therefore reinvest dividends automatically where each platform bulks all the dividend money for a particular company and makes 1 large purchase from th secondary market (ie from a seller). The shares will then will be split out of the large purchase to each of the individual shareholders on their platform.

Edit: Also bear in mind that many companies hold shares in treasury, therefore if the company 'release' those shares it doesnt affect the total number of shares in issue therefore not diluting other shareholders when distributing those shares.

WHAT!!?? I never heard such drivel. You need to buy a 'Beginners Guide to Investing' book and read it.

How do you think the company sets its dividend reinvestment price if its down to the broker to buy shares in the market at a totally different price???

george4064

EdGasket wrote: »

WHAT!!?? I never heard such drivel. You need to buy a 'Beginners Guide to Investing' book and read it.

How do you think the company sets its dividend reinvestment price if its down to the broker to buy shares in the market at a totally different price???

With regard to shares held through a investment platform (nominee form), the company doesnt care if the investors reinvest or not and they also dont care at what price the dividend money is reinvested at (as you like to call the 'dividend reinvestment price'. Because all they care about is distributing the dividend as a cash payment as promised.

This is slightly different with shares held directly with the registrar or in certificate form where they can offer alternative options such as scrip dividends or drip.

JohnRo

Ed, your reply seems to have no relevance to or understanding of the post you're quoting.

Shares have a market price, the platform buys in bulk at the prevailing price each month with the pooled client dividend reinvestment money allocated to that particular share and then distributes those shares it bought, pro rata, back to their respective client's accounts.

What's the problem?

EdGasket

That's not what most people understand by Dividend reinvestment which is taking new shares in lieu of the cash dividend. This arrangement is offered by most of the larger companies.

The OP in post 1 says "A $50 dividend is fully reinvested and you receive $50 worth of new shares in that company at no cost."; that to me sounds like normal dividend reinvestment run by the companies themselves but with an admin charge levied by the platform. I thought that is what he/she was talking about.

JohnRo

Anyone on a platform in the UK is required to hold a nominee account AFAIK, clients don't hold the shares listed in their accounts directly with the company in their own name.

As such the platform dictates to their clients what options are available and how much those options will cost them when it comes to dividend reinvestment or anything else.

bowlhead99

EdGasket wrote: »

That's not what most people understand by Dividend reinvestment which is taking new shares in lieu of the cash dividend. This arrangement is offered by most of the larger companies.

Sorry, but most people don't understand "dividend reinvestment" to mean taking shares in lieu of a cash dividend. The words dividend reinvestment mean taking your dividends and reinvesting them, which often comes with some non-zero cost implication.

Alternatively, by participating directly in a corporate "scrip dividend scheme" as an alternative to cash dividends, you can have the company issue shares to you at a fixed price that they agree as an alternative to paying you cash. That way, you don't need to reinvest your dividends because you have just received shares instead of the unwanted cash.

Eligible investors can sign up with the company concerned, to access the scheme, if it exists - it's not offered by all companies.

The OP in post 1 says "A $50 dividend is fully reinvested and you receive $50 worth of new shares in that company at no cost."; that to me sounds like normal dividend reinvestment run by the companies themselves but with an admin charge levied by the platform. I thought that is what he/she was talking about.

The OP is comparing that $50 reinvested via his US broker (likely through a company sponsored DRIP scheme) with what he gets in his UK ISA account operated by HL.

He is saying that he doesn't want to be charged for HL reinvesting his share of the dividend proceeds which they receive in their ISA nominee account in buying new shares for him in the same company. Well, tough, they're going to charge him for that, as would another typical UK broker in the same position.

They and their rivals may offer a scheme to do this at a reduced rate because of the efficiencies in dealing with a large number of shareholders who want to do the same thing at the same time. As pointed out by some in this thread, HL do operate such a scheme, involving reduced (capped and collared) transaction fees. This "dividend reinvestment" program from a UK broker is generally nothing to do with companies' directly offered scrip dividend alternatives.

bigfreddiel

EdGasket wrote: »

Reinvesting is pointless. If all shareholders reinvest their dividend then they would own just the same % of the company after the dividend as before the dividend and have no extra cash. Therefore a completely pointless exercise.

Ed, Try reading this article:

http://www.telegraph.co.uk/investing/shares/proof-that-you-cant-afford-to-ignore-the-power-of-dividends/

You MUST reinvest divis if you want to vastly benefit your portfolio.

Cheers fj

EdGasket

Thanks but I've no need to read that; seems we are talking about two entirely different things here; dividend reinvestment run by the companies where you take new shares in lieu of the dividend and some other kind of 'dividend reinvestment' schemes organised by trading platforms.

bigfreddiel

EdGasket wrote: »

Thanks but I've no need to read that; seems we are talking about two entirely different things here; dividend reinvestment run by the companies where you take new shares in lieu of the dividend and some other kind of 'dividend reinvestment' schemes organised by trading platforms.

Well I tried, suit yourself and very good luck for the future fj

tombland

EdGasket wrote: »

Really?? I rather think it's down to the company itself.

"A scrip dividend is a dividend that’s paid in shares that have been newly issued by the company, rather than in cash."

Also
"If a company has 100 million shares in issue and gives each shareholder another share for each one they hold, there are now 200 million shares in issue. Each is worth half as much as before, no cash has changed hands and nobody is any better off."

I suspect the point you're trying to make only applies to SCRIPs held with the company directly. Regular dividends don't work like this when they're set to automatically reinvest – they're simply bought on the open market.