A key attraction of investing in shares is the potential to earn regular, passive income through dividends. While a number of listed companies scaled back or suspended payments in 2020 to maintain precious cash reserves, dividends have been very much back on the agenda in 2021 and 2022.
A twice-yearly dividend is a welcome addition to many household incomes. But if you don’t need the cash, it can be worth thinking about a dividend reinvestment plan (DRP). It’s an option that lets shareholders take the value of a dividend in additional shares rather than cash.
DRPs are not limited to companies. They are also offered by exchange-traded funds (ETFs) and listed Australian property trusts (A-REITs). Many BetaShares ETFs, for instance, come with the option of a DRP. The basic principles, especially in terms of what to consider, are much the same across shares, ETFs and A-REITs.
WHY OFFER A DRP?
Companies have a compelling reason to offer a DRP. It lets the business hold onto capital rather than paying it out in dividends. This means more money to reinvest back into growth opportunities, which ultimately benefits shareholders.
Not all companies have DRPs. Among those that do, some are prepared to offer a discount on the shares swapped for reinvested dividends, letting shareholders get more bang for their buck (more on this later).
The real sweetener for many investors is an opportunity to save on brokerage costs. The extra shares provided through a DRP come straight from the company. This eliminates the need for broker involvement, so no broking fees are paid.
Bu hikaye Money Magazine Australia dergisinin April 2022 sayısından alınmıştır.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Giriş Yap
Bu hikaye Money Magazine Australia dergisinin April 2022 sayısından alınmıştır.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Giriş Yap
An outrageous, beautiful monopoly
Telstra's mobile business is a cash machine with few competitors, giving it the highest returns in the world.
Drop the anchor to judge value
Buying and selling decisions should be based on where a stock price is going, not where it has been.
Powering the AI boom
Beyond the software and chipmakers, where will the energy come from?
Get into life
Tucked inside super are products that can protect you from life's inevitable uncertainties.
Paths to home ownership
Taking the road less travelled can sometimes deliver unexpected benefits.
Sold! Quick ways to add value
Small, strategic changes can have a big impact on the look and feel of your home. And get you a better price on auction day.
Money lessons the kids need to know
Your children can learn a lot from your past money mishaps. Here are eight financial conversations I have had with mine.
Property-investing rules: are they likely to change?
The pressure for the government to curb the tax benefits of tax concessions, such as negative gearing and the capital gains tax discount, is unrelenting. Most recently, independent senators David Pocock and Jacqui Lambie proposed five options for paring back investment property tax concessions, with savings to the Federal budget of up to $60 billion over the next decade.
What's love got to do with it?
A rollercoaster of emotions could be driving poor crypto behaviour.
Are we ready to be cash-free?
Saying goodbye to our piggy banks too soon could leave small businesses in the dark when problems arise.