DRP & wanting to sell shares before dividend payment

[boiler123]

I hope someone will be able to help me on this - I wanted to sell shares in a company I bought since 2002. I have elected DRP for dividends since then. This company has gone ex-div at the end of February 2006, but dividend won't be paid until mid-April 2006. I would like to sell my shares now but I won't be able to sell the few DRP shares under the recent dividend announcement. Will I be able to change my dividend election to cash payment instead of DRP so I don't have to sell just a few shares when the dividend is paid? I will phone the share registry to ask question as well, but I thought someone will be able to help me first. My previous dealings with share registries have not been good!

Thank you.

 

[boiler123]

Re: DRP & wanting to sell shares before div payment

I see no one has answered my question. However, I have phoned the company and the answer was that:

1. I cannot change my dividend instructions from DRP to direct credit now because the book is now closed for the coming dividend payment.

2. If I wanted to sell my shares now I could only sell the ones I currently have. After the dividend payment in April, then I would sell the few shares received from the DRP. This means I will have to pay 2 lots of brokerage. However, the risk is that the share price may go down in April. So, I guess I will have to sell the bulk of my shares now.

 

[bullmarket]

Re: DRP & wanting to sell shares before div payment

Hi boiler123

I see no one has answered my question. However, I have phoned the company and the answer was that:

1. I cannot change my dividend instructions from DRP to direct credit now because the book is now closed for the coming dividend payment.

2. If I wanted to sell my shares now I could only sell the ones I currently have. After the dividend payment in April, then I would sell the few shares received from the DRP. This means I will have to pay 2 lots of brokerage. However, the risk is that the share price may go down in April. So, I guess I will have to sell the bulk of my shares now.

You will find that is standard practice for all companies re changing dividend payment instructions.

The reason as I understand it is that at close of business on the Record Date (aka books closing date and Ex-Div date is usually 4 business days before Record Date to allow for T+3) the share registry 'closes' the register (effectively takes a snap shot of it as it is at that time) in order to determine who will receive the current dividend and in what form (cash, DRP, combination of both etc). Companies usually give shareholders until the close of business on the Record Date to alter dividend payment instructions for that particular dividend.

You can still chage your dividend payment options after the Record Date and before the dividend is actually paid but your new instructions won't take effect until the dividend following the current upcoming one.

cheers

bullmarket

 

[bvbfan]

Re: DRP & wanting to sell shares before div payment

This is not to be taken as advice, but if its a large company you could use a CFD to hedge the movement in share price
ie. lock in the price today for the shares you have + the DRP shares amount and when you receive the shares in April you close the CFD position and sell your shares
Of course you would be paying CFD brokerage but you'd save on 2 brokerage lots + you'd get some interest for going short the CFD

Not advice but something you might want to think about

 

[boiler123]

Re: DRP & wanting to sell shares before div payment

Thanks, guys, for your comments.