A dividend reinvestment plan (DRP) is a program offered by listed companies that allows existing shareholders to reinvest their cash dividends into additional shares. This may be a convenient way for some investors to increase their shareholding by reinvesting a portion or all of their dividends.
Participation in any DRP is voluntary and investors may apply to participate, change their level of participation, or chose not to participate in the DRP at any time, subject to the notice periods outlined by the publicly traded entity. Shares are issued or transferred to the shareholder at a price based on the market price and, if the DRP applies to a dividend, there will be the option of receiving shares, a combination of shares and cash, or cash only. The is no additional cost, brokerage fee or other administration charge to participate in a DRP.
As an example, the Perpetual Equity Investment Company Limited Dividend Reinvestment Plan gives investors the flexibility to receive some or all of their dividends in the form of shares rather than cash, which is an efficient way of increasing their investment stake. Some other features are:
- Shares allocated under the DRP are free of brokerage, commission and stamp duty costs.
- Shares may be issued at a discount to the market price of the Company’s shares.
- Shares issued under the DRP rank equally with existing shares.
- You can participate, vary your participation or withdraw from the DRP at any time. Your application form must be received by the share registry by 5.00 pm Sydney time on or before the first business day following the record date to be active for the next dividend payment.
- A dividend statement outlining the dividend calculation and the details of any new shares allocated to you under the DRP will be despatched on the payment date for the relevant dividend.