Several companies in which I invest offer shareholders a choice between receiving a dividend in cash or in new shares. For some shares the default option is to receive cash and for others the default option is to receive additional shares.
As a general practice I will take the shares if (i) the underlying shares are highly liquid and (ii) at the time the election is made the subscription price for the new shares is at least a 2-3% discount to the prevailing market price. Out of four recent elections, I took my dividend in the form of new shares for Henderson (HK:12), K Wah (HK:173) and Cosco Pacific (HK:1199) and in cash for China Metal Recycling (HK:773).
It remains slightly irritating that I am unable to participate in dividend reinvestment plans for my Australian shares. The SFC would be doing Hong Kong investors an immense favour if they exempted offerings of new shares (rights issues, dividend reinvestments) to existing shareholders of companies listed on well regulated stock exchanges - at the moment Hong Kong investors are being disadvantaged by being excluded from such offerings.
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