Re: Dividends.
You could buy a meal for two, go to the cinema afterward and still have the price of two drinks, when I were a lad...
[Edit: I see the question was raised in today (Friday's) Q&A section in the Irish Times. I've inserted the relevant excerpt below for the benefit of those who don't have an ireland.com subscription...]
Aviva: I recently received correspondence from Aviva re their Scrip Dividend Scheme offering new ordinary shares in the company in lieu of cash dividends.
In their material, they state that cash in respect of dividends is not available to any person resident in the USA, Canada, or any jurisdiction outside the UK... "where such any offer would require compliance by the Company with any governmental or regulatory procedures or any similar formalities".
In short, can I avail of this scheme being a resident of the Republic of Ireland and, if this is the case, do you think it would be a good option in the long run?
I received my Aviva shares free many years ago. I was a policyholder at that time.
Mr R.C., email
The scrip dividend option has obviously caused a degree of concern among Aviva's estimated 90,000 shareholders in Ireland as I have received a number of queries this week on the issue. The simple answer is that you can join the scheme.
Scrip dividends allow people holding shares in a company to receive their dividends by way of further shares in the company rather than in cash. It is a relatively common occurrence.
It has a number of advantages, not least that people can acquire further stock in a company without incurring the full cost of brokers' commission. There is also the situation, familiar to the thousands of Eircom investors now holding Vodafone stock, where minuscule sterling dividends cost more to encash than their face value. Vodafone subsequently offered a scrip dividend alternative, which allowed shareholders accumulate dividends until they were able to purchase shares.
The downside to scrip dividends is twofold. First, if the company is a bum, you are only compounding your likely losses. Second, you will receive only the number of shares that can be fully paid for from the dividend.
The balance is usually held over until the next dividend date, which means the company gets to use part of your cash for six months or more.
It is also of little use to those individuals who choose their stock portfolio on the basis of dividend yield to augment their annual income. Of course, the payment of dividend by scrip issue also means that more shares in the company are issued, diluting the stake of those who choose not to participate.
The situation with Aviva is that Irish shareholders can avail of the scrip dividend option simply by filling out the mandate form provided. If you have not got a mandate form, contact the company and you will receive one.A company spokeswoman said it never intended to confuse Irish shareholders and that they were fully entitled to participate in the scrip dividend option.
As to whether availing of the scrip option is an appropriate investment option, I'm no more qualified than you to say, maybe less so. Insurers are doing well at the moment but pressures on costs and margins in the sector are constant.