Scrip Dividends

What is a scrip dividend or stock dividend?

Scrip dividends are widely used in European countries outside Germany and in the rest of the world. In Germany, this innovative way of paying dividends is also gaining ever wider acceptance, boosted by the COVID pandemic and the need of many companies to protect their cash position.

A scrip dividend is structured either as a non-cash capital increase with the issuance of new shares against contribution of the dividend entitlement, or as an exchange of treasury shares against the dividend entitlement. Shareholders have the option of having the dividend paid out exclusively in cash, receiving it in the form of shares, or opting for a combination of cash payment and scrip dividend.

Why offer a scrip dividend?

A scrip dividend is attractive for several reasons. It significantly reduces the cash outflow caused by a normal distribution and strengthens the company’s equity position. Different shareholder interests (distribution vs. accumulation) can also be accommodated. In addition, the transaction structure is relatively lean compared to a conventional capital increase. There is no requirement to publish a prospectus, while the costs are low relative to the cash saved (they also tend to become even lower the more often the company offers a scrip dividend).
Many companies of different sizes have opted for scrip dividends in recent years.

How can we support you?

As a capital markets partner of Deutsche Börse, we also offer you webinars, podcasts and the full range of legal advice (live and digital) on scrip dividends in the Capital Markets Service Hub. A recording of the webinar "Scrip dividend – Dividend king despite Covid" is available here.