Scrip dividend

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Equity Derivatives Anatomy™

Resources About the Equity Derivatives Definitions | (full wikitext) | (nutshell wikitext)
Hot topics Synthetic Prime Brokerage Anatomy | The Triple Cocktail | Cancellation and Payment | Calculation Agent
TOC | 1 General Definitions | 2 Option Transactions | 3 Exercise of Options | 4 Forward Transactions | 5 Equity Swap Transactions | 6 Valuation | 7 Settlement | 8 Cash Settlement | 9 Physical Settlement | 10 Dividends | 11 Adjustments and Modifications | 12 Extraordinary Events · 12.8 Cancellation Amount · 12.9 Additional Disruption Events · 12.9 List of ADEs · 12.9(b) Consequences of ADEs | 13 Miscellaneous

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Scrip dividends give investors the option to receive additional (usually freshly issued) shares instead of a cash dividend. They are exempt from stamp duty and dealing charges and are cheaper for the issuer, since it can hang onto the cash within its business.

holders can sell scrip dividends in the market and there is a fungame to be had playing the implied optionality between the scrip and cash after the dividend has been declared but before it is paid.

Scrip dividends are taxed in the same way as cash dividends.

See also