Share dividends..

S

Sombrero

i get shares with my work, and they're offering dividends as cash or extra shares... never really thought about it before, but is either option better than the other?
 
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have the divs reinvested into additional shares. Chances are they will be so small (a matter of pence at first, or maybe a pound or two) that you won't notice it if you get cash, but, reinvested, they will make your pot grow faster, and you will usually have no, or a very small, dealing charge that way.

If your pot grows so big that you are receiving £100 or more in divs, it becomes big enough for you to consider taking the cash and using it for a Christmas present, or to take your wife or girlfriend out, or maybe both of them.

Typical UK divs are in the region of 4%, so you would need £2,500 worth of shares to get that, which I am guessing will take you some time to accumulate.

Dividends have 10% tax deducted. If you are a standard-rate taxpayer you have no additional tax to pay on divs. If you are a non-taxpayer you can't get a refund.
 
I joined a "sharesave " scheme, with a company I worked for from 1979-1990. It was taken over in 1990 and even though my sharesave had about 6 months to run till I got the shares, or capital + interest, the takeover company offered me well above the going rate to drop out of the scheme. I had about £3000 saved at that point and was offered £6000 (going share price at the time would have made me about a grand on top of my savings). ;) ;)
 
I joined a "sharesave " scheme, with a company I worked for from 1979-1990. It was taken over in 1990 and even though my sharesave had about 6 months to run till I got the shares, or capital + interest, the takeover company offered me well above the going rate to drop out of the scheme. I had about £3000 saved at that point and was offered £6000 (going share price at the time would have made me about a grand on top of my savings). ;) ;)

Good point, shares can have more value than 'real' money !
 
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actually, when the default option is cash, that would suggest that the 'best' option is shares !!
 
A company I used to work for had a great scheme, within limits, for each share you bought with salary deductions, they gave you one free. You could only lose money if the share price halved.

Guess what?

Long after I left (the shares weren't worth enough to bother selling) they started creeping up again, and are now worth more than they used to be.
 
i get shares with my work, and they're offering dividends as cash or extra shares... never really thought about it before, but is either option better than the other?

If you think the price of the shares is going to go up over the time you will hold them then, take the shares.
If you think the price of the shares is going to go down, take the cash.

You should be in a better position than most to know what the share price is going to do as you work for the company.

You might also consider the risk of having all your eggs in one basket, if you only have one company shares you are not diversified. If you take the cash and buy shares in other companies you spread the risk.

(You also need to consider the tax implications which adds a bit of complexity but nothing a spreadsheet cannot manage)
 
BG has a number of engineers who have never sold a share and have over half a million quid tied up in them now.
Best one i done with BG was turning 7k into 42k in the space of 3 years but in the proceding 13 years they have only gained around 20k but pay divis of around 2k a year
 
Unless you need the income from dividends, take the extra shares.

However....

A FEW IMPORTANT POINTS

You are employed by the company...
You probably have your pension with the company...
You also own shares with the company...

You have rather a lot of eggs in one basket, its worth mentioning, so once you have accumulated a reasonable amount of shares, it would not be a bad idea to 'diversify'.
 
I remember when BT shares were £17 each, and the lucky owners were crowing. I was thinking I could buy a really nice car, once my journey to work dropped.

They later plummeted to 80p
 
Good point JohnD. When the stock market crashes (like Black Monday in 1987) the only people who lose money are those who chicken out and sell their shares. Could also be a good time to buy shares at bargain basement prices. ;) ;)
 
A BT colleague of mine formerly at Marconi had over £60k of Marconi shares, after the price crashed they were worth a little over £1k.

Hence not having all your eggs in one basket.

He not only lost his job, he lost his savings.
 
have the divs reinvested into additional shares. Chances are they will be so small (a matter of pence at first, or maybe a pound or two) that you won't notice it if you get cash, but, reinvested, they will make your pot grow faster, and you will usually have no, or a very small, dealing charge that way.

If your pot grows so big that you are receiving £100 or more in divs, it becomes big enough for you to consider taking the cash and using it for a Christmas present, or to take your wife or girlfriend out, or maybe both of them.

Typical UK divs are in the region of 4%, so you would need £2,500 worth of shares to get that, which I am guessing will take you some time to accumulate.

Dividends have 10% tax deducted. If you are a standard-rate taxpayer you have no additional tax to pay on divs. If you are a non-taxpayer you can't get a refund.

Good advice John. See, you are a Thatcher's child after all - a capitalist, red in tooth and claw.

Hope you got your shares for BT and BG in the 80s floatations.

Don't forget to tell Sid! :LOL:
 
No, I felt it was immoral to participate in the Thatcherist casino, so I did not involve myself in any of the privatisations.
 
No, I felt it was immoral to participate in the Thatcherist casino, so I did not involve myself in any of the privatisations.

What I thought weird about the Thatcher privatisations was we had to pay for something we already owned ! They should really have given the shares to everybody who was an income taxpayer in the previous five years. Or something like that.

It did bring a lot of money in mind which was desperately needed at the time. It also introduced the efficiencies that only the private sector can bring, government run outfits just pour money down the drain. Still do.

Obviously the directors of a company have a legal obligation to put their shareholders' interests before their customers, but no system is perfect.
 
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