Share Dividend - cash or shares

T

twofor1

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I,m a new investor, just got a letter saying I'm getting a dividend and do I want it in cash or shares.I'm thinking shares and assuming I'll have to pay the 1% stamp duty but no brokerage fee. Shares are held in NIB Custody A/c. Are there Pros/Cons to either choice ?
 
twofor1 said:
I,m a new investor, just got a letter saying I'm getting a dividend and do I want it in cash or shares.
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Do you mean a DRIP? Note that even if the dividends are reinvested in shares through a DRIP then you are still liable for income tax (less any witholding taxes on dividends paid) on the divident income.
I'm thinking shares and assuming I'll have to pay the 1% stamp duty but no brokerage fee.
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Check the terms & conditions of the DRIP in question.
Shares are held in NIB Custody A/c. Are there Pros/Cons to either choice ?
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If you had the money in your hand would you necessarily be rushing out to buy more shares in this company? If so then it's a good idea. If not then it's not. There are also issues with holding shares other than in certificate form. See the key posts on the pros and cons of the different ways of holding shares.
 
Never heard of a DRIP, have read the link, Thanks. Sounds similar to the first two paragraphs. The shares are in a major irish bank paying dividends twice yearly. The letter says; We have been informed that shareholders in the above company may choose to have the dividend paid either in cash or in new shares. Your net div. per share is €0.xx. You will receive only full shares, fractions , if any settled in cash. Tick appropiate box sign and return.
 
Sounds like a DRIP so. Make sure to read the detailed terms & conditions of the scheme before committing to it.
 
"Sounds like a DRIP so. Make sure to read the detailed terms & conditions of the scheme before committing to it."

Does anyone know the difference between a DRIP as described above and a scrip dividend scheme?
 
If it's new shares it's not a DRIP. Is it entitled "SCRIP DIVIDEND OFFER"?
If it is this, these are new shares issued at a set price. No stamp duty/brokerage fee. Very shareholder friendly. Take it if the price is at or below the current share price.
Regards
 
Never thought that it might be a script dividend issue rather than a DRIP! Wikipedia have a bit on scrip dividends in case that helps. I'm sure that Google might come up with more/better explanations/comparisons.
 
Presumably income tax is still due on the nominal dividend payment?
 
Meant to mention that. Of coure your income tax liability doesn't change whether you take cash or shares.
 
Letter is titled Notice of dividend payment. It tells me I have x no.shares,dividend is x per share, payment date is 15/01/08 and on that date I can have either shares or cash. No mention of DRIP or SCRIP or any terms/conditions. Does this not simply mean whatever number of shares my dividend will buy on payment day is what I will get if I choose this option, or all cash if I choose the second option.Should be no additional tax issues as all I'm doing is buying shares with my dividend. If this is the case are there pros/cons to either choice ? Thanks.
 
twofor1 said:
Should be no additional tax issues as all I'm doing is buying shares with my dividend.
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No additional tax issues. But bear in mind that if you are a 41% taxpayer and the dividends are paid net of dividend witholding tax (20%?) then you still owe the balance.
If this is the case are there pros/cons to either choice ?
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Did you read my first reply?!
 
Nib deduct tax automatically of the dividend, 20% is paid, no other tax liability as far as I'm aware. If I'm incorrect in my assumptions please correct me as I'm in the same situation.
 
Digger said:
Nib deduct tax automatically of the dividend, 20% is paid, no other tax liability as far as I'm aware. If I'm incorrect in my assumptions please correct me as I'm in the same situation.
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20% is deducted at source. If you pay tax at the higher rate it is up to you to pay the extra amount.
 
Yes - as already pointed out dividends are assessable for income tax so if you pay 41% tax and 20% is witheld then you are still liable for the additional 21%.
 
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