Recently, OCBC announced the distribution of scrip dividend in lieu of cash dividend. Its dividend was $0.18 per share and the bank had established a conversion rate of $9.50 per share, a discount to on-going share price. Given the discount to the prevailing share price, the scrip dividend has been ‘in-the-money’. Those shareholders who opted for script dividend would have gained much more than the original dividend if he had held the stocks till today. With the current share price of about $10.36, the share holders would have gained $0.86 per share for the dividend that they held in scripts. In fact, script dividend can be a powerful compounding tool if the share price increase gradually over the years.
(Brennen Pak has been a stock investor for more than 25 years. He is the Principal Trainer of BP Wealth Learning Centre LLP. He is the author of the book “Building Wealth Together Through Stocks.”) – The ebook version may be purchased via www.investingnote.com.