Alternative Cash Dividends

Question 1

What is scrip dividend?

Answer 1

A dividend paid by issue of additional company shares, rather than by cash

Question 2

How may a scrip dividend be offered?

Answer 2

To existing shareholders as a choice between cash or shares, or an alternative to a cash dividend

Question 3

Advantages of scrip dividends?

Answer 3

It is useful for conserving cash

Decreases gearing as there’s an increased issue of shares

Question 4

Disadvantages of scrip dividends?

Answer 4

Dividend per share is maintained. Thereby total cash payment increases

Price of individual share may fall if there’s an increase in supply of shares

Question 5

What are share repurchases?

Answer 5

A company returning significant amounts of cash for shareholders

Question 6

Where may share repurchase be appropriate?

Answer 6

If there is one-off cash surplus generated from asset sales

Tehe company wants to give an exit route to disaffected shareholders