07-20-2018, 03:40 PM
(07-09-2018, 09:06 PM)crimsonghost747 Wrote: Offtopic: Regarding the scrip dividend.
Does anyone else understand the point? I mean I get it, they didn't have much cash and they wanted to keep their history of not cutting the dividend. But basically what it did was increase their sharecount when things were bad and the share price was around 20e-27e. And now that everything is good, they will be buying back those shares from the market at 30e+.
I think the company lost insane amounts of money doing this, simply because they wanted to keep the streak alive. I guess this is a good example of why companies can be seriously hurt when they feel like the dividend can't be cut, even if the fundamentals are telling you to cut it.
I guess a scrip is like an "IOU" from the participating company. The company issues new shares in lieu of a cash dividend, (1) They preserve their cash reserves (2) They can avoid a corporate tax on dividends paid (3) The current dividend stays in tact
Only about 25% of shareholders participated in the RDS Scrip Program, and if I'm not mistaken, this is the second scrip program that RDS initiated in the last 10 years or so...they must have seen some benefits to do it again
Scrip programs tend to be used primarily by foreign based companies, there has to be something to this...taxes? I'm just guessing