With DRP, what happens to 'funds carried forward' if you sell the shares?

Quite often, when using DRP, the entire amount available for spending isn't used in acquiring new shares, and there may be a few dollars carried forward and used in the balance to buy the next lot of shares at the next dividend payment time.

Eg. If a dividend payment was due to be $500, and the DRP was paying $40 per share, that would mean that the DRP would allot 12 new shares (12 x $40 = $480), and then the remaining $20 would be carried forward and used at the next DRP.

However, what happens to the $20 being carried forward if the shares are sold before the next ex-div date?

 

You forego it. However, some companies sych as WES, WBC and MTL do pay the residue.

Check the T&C's but that's tedious.

 

The balance carries forward till the next time until you have enough for a whole share

 

But if you have sold all the shares that you have (an allocation of 0), surely the company would no longer have you as a registered shareholder, and not assign any dividends to you the next time that they are paid...

 

You will be registered on computershare or similar

For some reason I have 1 share of a certain stock which is trading at about $56. Every quarter I get about 98c which is carried forward to have enough for another share allocation. I think I must have sold after the dividend date but before the payment of the dividend or something.

Here is what the statement looks like:

 

@KayTea my experience has been the money has been refunded at the next dividend date. The other times it has happened for me was when I cancelled DRP and moved to cash dividends something I did for all my holdings a few years ago.

 

The answer is to get the money back by putting in a form to cancel the DRP.

 

@KayTea as any good lawyer would say "What is in the contract?"

Check the T&C's of the company's DRP. For AFI it is clause 9. Residue foregone. Others have different arrangements.

And don't rely on the share registry to apply them properly in some circumstances. I had a battle Royal with one which said because one of my kids had changed from an SRN to a HIN they didn't have a carry over balance as it ws effectively a new share holding. Had to get the Company Secretary involved to give them a swift kick.

 

Thanks Terry - I'm thinking that cancelling the DRP could help avoid that. I'll investigate further.

 

Take the dividends (or partial divvies) as cash and allocate where needed in the portfolio

 

Aw @Redwing. Have ye not noticed some of the holdings of a few directors in some LICs and their attitude to DRPs? CB Goode to name but one. I wouldn't mind having about $46m of skin in the game.

 

Be nice to have some of Charles Barrington's (and associated entities) dividend producing minion army

 

Interesting to some but not others. When selecting partial DRPs for ALI and MLT you are given the option to select a percentage split rather than a specific number of shares.

Probably means two statements for the dividend payment.