# Dividend Reinvestment



## roland (10 December 2009)

Where do the additional shares come from when a company has a dividend reinvestment scheme?

Is it from a pool of company owned shares or do they issue new shares?


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## glendaw101 (10 December 2009)

Roland

The company instead of giving you the cash from its earnings will issue you with new shares at a predetermined price to the value of your dividend. 

Effectively the company uses your money to reinvest in the company in exchange for an extra piece of the company in the form of extra shares.


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## gooner (10 December 2009)

roland said:


> Where do the additional shares come from when a company has a dividend reinvestment scheme?
> 
> Is it from a pool of company owned shares or do they issue new shares?




Depends on whether the company needs the capital or not - most schemes enable the company to choose to issue new shares to satisfy DRP or alternatively to buy shares on market to satisfy the DRP


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## roland (10 December 2009)

gooner said:


> Depends on whether the company needs the capital or not - most schemes enable the company to choose to issue new shares to satisfy DRP or alternatively to buy shares on market to satisfy the DRP




so it may be dilutive


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## gooner (10 December 2009)

roland said:


> so it may be dilutive




Roland

Yes and very dilutive if they underwrite the whole dividend

But, still an appropriate strategy if dividends are fully franked as franking credits have little value until distributed


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## Onceblue (9 January 2010)

A quick question on the subject of dividend re-investment. Suppose the dividend equates to x.y shares and you're issued with x shares. The 0.y share is carried over to the next dividend distribution. What happens if you sell your holding in between time, do you just lose the fraction share?


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## DB008 (9 January 2010)

I'm pretty sure that RIO buys shares "at market" from your dividends.
My entry price went lower, and shares on hand increased. 
Not too sure if l explained myself clearly. these becks are really starting to taste nice...lol.


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## Hyperion (10 January 2010)

Onceblue said:


> A quick question on the subject of dividend re-investment. Suppose the dividend equates to x.y shares and you're issued with x shares. The 0.y share is carried over to the next dividend distribution. What happens if you sell your holding in between time, do you just lose the fraction share?




It depends on the terms of each company's dividend reinvestment scheme.

They might pay it out in cash or the terms may just say that its just forfeited.


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## phantomcamel (24 February 2010)

DB008 said:


> I'm pretty sure that RIO buys shares "at market" from your dividends.
> My entry price went lower, and shares on hand increased.
> Not too sure if l explained myself clearly. these becks are really starting to taste nice...lol.



 I would "argue" it depends on the price of the share & the volume you own. If you only owe a few shares in a minor company & only small amounts you probably are better off going re-investment as you save the brokerage fee. With a decent amount of RIO it may be better to use the money & buy not at market price MHO


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## divs4ever (25 January 2022)

Weighing up the pros and cons of dividend reinvestment​








						Weighing up the pros and cons of dividend reinvestment
					

Before reinvesting dividends in more shares ask if those funds can be deployed better elsewhere




					www.marketindex.com.au
				




 DYOR 

 up until the end of 2020 i mostly signed up for DRPs  , but now i am less likely to sign up the NEW DRPs ( but haven't yet reduced participation in DRPs i had already signed up for )


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