Gengulphus wrote:Dod101 wrote:Cancellation of the scrip dividend is surely a good sign in that they feel they can generate the cash not to need to encourage shareholders to take scrip instead of cash for the dividend.
It should also have the side-effect that I don't believe there will be any reason after the change for Shell to delay fixing the dividend exchange rates for some weeks after the results - as far as I'm aware, that was done to resolve a timing issue about getting shareholders' scrip dividend elections. Which will get rid of the nuisance of the results telling us what the company is doing with the dividend, but needing to revisit some weeks later if we want to know exactly what we'll get. (By the way, I really do mean "nuisance",
not "major issue"!)
One other practical side-effect that some will find a bit more annoying: taking dividends on RDSA shares as scrip rather than cash avoided paying Dutch withholding tax on them, and if the investor's UK tax rate was below the Dutch withholding tax rate (15%, I believe), that would not be counteracted fully by an increase in the UK tax bill - or at all if the UK tax rate was 0%, as in particular it is in an ISA.
So once scrip dividends are no longer available (*), those investors who have RDSA shares in an ISA will start to suffer Dutch withholding tax on their dividends. Also, since scrip dividends were paid in RDSA shares regardless of whether the dividends arose from RDSA or RDSB shares, investors who hold either type of share in an ISA and who have chosen to receive scrip will probably have a holding of RDSA shares. Similar considerations apply to other holdings than ISA ones that are subject to a UK tax rate under 15% - I won't try to list all the ways that could be the case for a holding, as I'm not even sure I know them all!
That Dutch withholding tax is of course avoidable by selling the holding of RDSA shares and using the proceeds to buy RDSB shares, at the cost of trading costs, possible CGT and a likely change in the number of shares owned as a result of the two types of shares having different prices (currently a fall, as the RDSB price is currently a few percent higher than the RDSA price). Whether it's worthwhile can only really be worked out on a case-by-case basis, as it will depend heavily on the UK tax rate involved, whether CGT is involved, the size of the RDSA holding and current share prices.
(*) They are still available for the 3rd quarter dividend, which is the one due to be paid on December 20th, and those with registered shareholdings (i.e. held as certificates or in CREST accounts) can even still change whether they get that dividend as cash or as scrip if they really get their skates on - the deadline for scrip elections to be received by the company registrars is tomorrow. That almost certainly won't apply for ISAs or any other kind of nominee account, as I've never come across a nominee broker who passes client instructions on to registrars anything like that quickly.
They won't be available for any subsequent dividends - until and unless the company changes its mind again about offering scrip.
Gengulphus