Dividends & Corporate Actions

Dividends & Corporate Actions

What are Dividends?

Dividends are income payable to shareholders from Companies that are making profits and decide to pay a dividend back to its shareholders.

Dividends are optional and not guaranteed, usually paid half-yearly, known as 'Interim' and 'Final' Dividends.

They can be declared as either Cash or Scrip Dividends.

A Scrip Dividend is an allotment of more shares in the Company using cash.

What are Corporate Actions?

Corporate Actions are defined as events bringing material change to the basis of a share. Basically this means the way the share is set-up is changing.

What types of Dividends are there?

There are two types of dividend:

Final Dividend: The dividend paid by a Company at the end of its financial year. These are not guaranteed.

Interim Dividend: The dividend paid by a Company halfway through its financial year. These are not guaranteed.

How will a Dividend be paid?

If you hold the shares at home in the form of a paper Certificate you will receive a cheque through the post and a Tax Voucher for your records and declaration as Income on your Tax return.

If you hold the shares with us you will automatically be credited the cash by the Registrar direct to your account here with us. We will not send you a Tax Voucher each time you receive a dividend to your account, but we will issue you with a Consolidated Tax Voucher each April for the previous Tax Year (6th April - 5th April) so that you can declare the Income on your Tax return annually.

Who's entitled to receive a dividend?

To be entitled to receive the dividend, you must be a shareholder as at the close of business the day before the 'Ex-Date'.

The Ex-Date for dividends is usually set two working days before the Record Date.

Can I change my mind after I have advised you what I wish to do for a Corporate Action?

If you accept an offer we may be able to stop the action if it has not been actioned by us. If it has been actioned you will be unable to withdraw your acceptance.

(Except in the case of takeovers where, if certain conditions are met during the takeover timetable, withdrawal can be possible).

What is an 'Ex-Date'?

The full name for an 'Ex-Date' is the 'Effective Date'. Corporate Actions, excepting Takeovers, have an 'Ex-Date'.

This is announced by the Stock Exchange setting the date for entitlements (i.e. ensuring you take part) to a Corporate Action. The owner of a share on the 'Ex Date' is the person entitled to the offer.

Buying the stock on this date or after means you are not entitled and if you sell on or before this date, you do not retain the entitlement to the offer.

What happens if I would receive part of a share?

If your holding under the Corporate Actions does not split exactly into whole shares you will be left with a portion of the new ordinary share.

As you cannot hold fractions of shares, the company will aggregate your portions with other shareholders and sell as a block.

The proceeds from the sale is then split between the shareholders in proportion to your fractions.

Do you issue Consolidated Tax Certificates?

Yes. If you hold the shares with us we will issue you with a Consolidated Tax Voucher each April for the previous Tax Year (6th April - 5th April) so that you can declare the Income on your Tax return annually.

What does 'Nil Paid Shares' in My Portfolio mean?

Nil Paid Shares are issued to existing shareholders when a company conducts a Rights Issue to raise funds by issuing more shares.

As an existing shareholder the company issues you a right to purchase the new shares before anyone else, normally at a price lower than the current market price - your Nil Paid shares.

Only holders of the Ordinary Shares on a certain date, the Ex Date are entitled to Nil Paid shares.

Under the Rights Issue you are advised how many new shares you can buy and the cost to exercise the Right.

What does an 'Open Offer' entitle me to?

Open Offers are used by companies to raise funds. They also have a ratio and a cost to subscribe, very much like a Rights Issue.

A definition of an Open Offer is provided under the section 'Definitions'.

But basically the company asks existing Shareholders if they want to buy more shares in the company at a specified price.

Can I sell my original holding before I receive the new shares from the Rights Issue or Open Offer?

If you do sell your original holding before you receive the new shares, and then you would like to sell the extra shares you would have to make a second sale.

How do I work how many shares I can get and the cost from a Rights Issue or Open Offer?

Under a Rights Issue or an Open Offer the ratio of the action and the call cost is how you work out the cost of the action and what you will gain.

With a Rights Issue, if you held 1000 Barclay shares and the were offered a Rights Issue of 2 new shares for every 5 held at 40p, then you could apply for 400 new shares and the cost would be 40p per share - a cost of £160.

When do I pay for the new shares?

You pay for shares on the Call Date, which will be set in advance as part of the offer.

Can I purchase Nil Paid Rights in a company even though I don't hold the original company?

Yes, Nil Paid Shares can be bought as a security and normally cease being able to be bought and sold two days before the Call Date.

The onus will be upon you to inform the company of your intentions if you purchase nil-paid rights.

If we do not receive valid instructions from yourself, the nil-paid rights may be allowed to lapse.

What is a sub division?

When a company divides its shares into a larger number of shares, it is called a Subdivision.

Companies use a Subdivision is to improve the liquidity of their share price if the price has become too high.

The more shares in issue the easier it for people to buy in smaller amounts creating liquidity in the share price.

What are Shareholder Perks?

If you are the holder of shares in a company, some companies offer 'Shareholder Perks' that entitle you to a benefit from that company such as reductions in ticket prices, discounts on things you buy through them or other advantages.

Click here to see a list of shareholder perks currently available to shareholders in certain companies.