Newbie question on dividends

00112984

Hi all. Sorry for the newbie question. I've been investing in shares for just over a year now thorough my Davy Select account. Several of the companies I've invested in are due to pay dividends between now and May.

Just wondering if anyone knows will the dividend be paid to Davy and put into my trading account or will I receive a cheque from each company to my home?

Thanks!

hfallada

You are better having your dividends paid out in the form of more shares being purchased to the value of the dividend. It's quite common and more tax efficient if you are a high income earner

00112984

hfallada wrote: »

You are better having your dividends paid out in the form of more shares being purchased to the value of the dividend. It's quite common and more tax efficient if you are a high income earner

Thanks hfallada. I'll look into this. I am taxed at the higher rate so would love a more tax efficient alternative.
It's not a big amount this year anyway.

Bizness

hfallada wrote: »

You are better having your dividends paid out in the form of more shares being purchased to the value of the dividend. It's quite common and more tax efficient if you are a high income earner

For Irish residents and paying tax in Ireland, tax savings via reinvesting dividends does not apply. If you are a top-rate taxpayer, you still pay full whack even if you elect to take the dividend in scrip form, i.e. reinvesting in more shares. Along with PRSI and USC of course.

There is a tax savings for UK taxpayers of course, they being more progressive and encouraging equity investment. All the Paddy ruling elites know is pumping up property (with tax-free schemes) so as to enrich themselves and their buddies- it is why the capital gains and tax on dividends here is now a rip-off.

Only saving Irish taxpayers get is on the commission charge for the scrip dividend and the stamp duty sometimes, though not all companies waive these two charges.

If you have a nominee account shareholding with Davy, then Davy will get the dividends and then lodge to your account. Watch that they don’t screw you on foreign exchange for non euro denominated dividends.
If you have a Crest type shareholding, then I think you should get the divs direct to your address (same as if you had the paper share certs).
Not sure with Nominee, if you can elect for a scrip dividend.
Not all companies offer the scrip dividend option either.

That said, even after having to pay the tax on the dividends, reinvesting it in the companies is always a good option, as most of your long-term returns come from reinvested dividends.

thomasm

Kind of off topic but what happens a share price after a dividend is paid. Does the distribution of cash decrease the share price

Bizness

thomasm wrote: »

Kind of off topic but what happens a share price after a dividend is paid. Does the distribution of cash decrease the share price

Yes, on the date they go ex-dividend, share will drop by the amount of the dividend usually as anyone buying the share on that day is no longer entitled to a dividend. They open at the lower price when market opens. If general market is down on that day, then shares can drop by more than the dividend amount, and can keep falling somewhat over next 2-3 days. Opposite can happen if the overall market is up, in that the share may not drop the full amount of the dividend.