Scrip dividend

A scrip dividend is a scrip issue made in lieu of a cash dividend. Shareholders are able to choose whether to receive a cash dividend or shares. This is the difference between a scrip dividend and a scrip issue.

Shareholders who wish to reinvest will prefer a scrip dividend to a DRIP as it avoids dealing costs, and the number of shares received is known at the time the election to receive shares rather than cash is made. In the case of a DRIP, the number of shares bought will depend on the share price on the day of the purchase itself.

As with any scrip issue, the shares issued to pay a scrip dividend need to come from the capitalisation of reserves.