Investing - Share Dealing - Dividend/Corporate Action
A dividend is the distribution of part of a company's earnings to shareholders and is usually paid twice a year. An 'Interim Dividend' is paid by a company halfway through its financial year and a 'Final Dividend' is paid at the end. Dividends are not guaranteed and the directors of a company have discretion as to how much, if any, of a dividend to declare. Dividends are quoted in the amount paid per share.
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In order to decide who should be paid the dividend the issuing company designates a date, known as the record date. The dividend will be paid to the list of shareholders who hold stock on the record date. To allow time to process stock settlements by the record date, stock exchanges set a date, usually two working days before the record date, known as the ex-dividend date. Anyone who purchases stock into their nominee account on or after the ex-dividend date will not receive the dividend as the purchase will not settle by the record date.
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Dividends are nearly always paid in cash, but they can also be in the form of stock known as 'Scrip Dividend'. The Motley Fool Share Dealing Service only handles cash dividends but we do offer automatic dividend reinvestment (DRIP) for CREST eligible shares.
Dividend payments are made on a date known as the due date or payment date.
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DRIP is a 'Dividend Reinvestment Plan' which allows dividends paid in CREST eligible shares to be automatically reinvested in the underlying equity as soon as practical on or after the dividend payment date. DRIP carries a 2% commission charge (capped at £10) and 0.5% stamp duty. Any remaining cash will be credited to your account following the DRIP purchase.
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If you would like to elect for dividend reinvestment on all CREST eligible shares you will need to sign in and select 'Account Settings' from the left hand menu followed by 'Dividend Handling' from the sub menu. For each account decide how you would like your dividends to be handled and click on 'Accept' to confirm your choices. The option selected one business day prior to the dividend payment date will be applied to that dividend payment.
Please note that during dividend reinvestment the balance shown on your 'Cash Statement' and on your 'Amount Available to Invest' may differ whilst the appropriate commission charges are being deducted.
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A 'Corporate Action' is any event which brings material change to a stock. Rights Issues, Takeovers, Open Offers, Share Splits, Bonus Issues and Consolidations are all examples of corporate actions.
If you are a shareholder in a company that is having a corporate action, you will sometimes be asked to make a decision about what you want to do. Your decision can have an impact on what the company does or affect your own investments. Most corporate actions will in some way change the number of shares you have, or the ratio of your holding to the total number in issue, or the acquisition cost of your shares for tax purposes.
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You will be notified by email when there is a corporate action on one of your investments, however, for security purposes the email will not contain any specific details. To view the corporate action you will need to sign in and select 'Account Management' from the left hand menu followed by 'Corporate Actions' from the sub menu. You will be presented with a list of your accounts together with a total number of events affecting investments in each account. The events are split into 'Optional Events' which allow you to decide on the corporate action and 'Compulsory Events' which are mandatory changes to your investments. If you select an account you will be shown a breakdown of the events on that particular account. Clicking on the event subject will show the full details of the event and, in the case of an optional event, the choices available to you.
Please note that there is a £7.50 charge for participating in selected corporate actions including Rights Issues, Open Offers and Offers for Subscription for The Motley Fool Share Dealing Account, and £2.50 for The Motley Fool ShareBuilder. All other corporate action events are free of charge and there is no charge for shares held in The Motley Fool Self-Select ISA, The Motley Fool Funds ISA and The Motley Fool Share Dealing SIPP.
If a payment is required to participate in a corporate action, for example to take up a Rights Issue, then the money must be in your account by the date advised. For The Motley Fool Share Dealing SIPP, this contribution should be made via Sippdeal allowing sufficient clearance time.
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If you have to make a decision on a corporate action affecting one of your investments you will be given a date when you must have taken action by. You can change your decision at any time up to this date. To do this you will need to sign in and select 'Account Management' from the left hand menu followed by 'Corporate Actions' from the sub menu. Select the required account to show a breakdown of open events and click on the event you want to change. Update and submit your election.
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Risk Warning
The value of your investments and the income from them can go down as well as up.
You may not get back the full amount you have invested. If you're in any doubt about the suitability of an ISA, SIPP or whether to buy or sell shares, you should consult an appropriate Financial Adviser.
The Motley Fool Share Dealing Service is provided by Halifax Share Dealing Limited. Halifax Share Dealing Limited. Registered in England No.3195646. Registered Office: Trinity Road, Halifax, West Yorkshire, HX1 2RG. Authorised and regulated by the Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS. A Member of the London Stock Exchange and an HM Revenue & Customs approved ISA Manager.
The Motley Fool Limited is an Introducer Appointed Representative of Halifax Share Dealing Limited.
