Scrip Dividend Scheme: Why Getting Paid In Shares Is One Wise Investment Move

Ching Sue Mae

Ching Sue Mae

Last updated 14 January, 2021

Cash or shares — which would you pick for your dividends? Here’s what scrip dividends are and reasons for investors to choose either option.

What’s the scrip dividend scheme?

Some companies give out dividends to their shareholders. This dividend is typically in the form of cash that will be credited into the bank account linked to your Central Depository (CDP) account

Companies can also opt to offer their shareholders scrip in lieu of cash, which is the option for shareholders to receive their dividends in the form of shares instead of cash. These shares are often offered at a discounted price, based on the price that the stock was trading at during that period of time. 

For example, for OCBC’s scrip dividends in 2020, new shares were issued at 10% discount to the average of the daily volume weighted average prices of the shares during the price determination period.

Taking scrip instead of cash is optional and shareholders can still opt to receive cash dividends instead. However, companies may not have scrip as an option every time they give out dividends.

Here’s what taking cash or scrip might look like, using the scrip offered by OCBC in 2020 as the example, assuming you have 5,000 lots of OCBC shares. 

Interim dividends given for 2020$0.159 per share
Scrip offer price$7.81 per share
If you take cash, you would receive$795 
If you take scrip, you would receive101.79 OCBC shares (rounded up to 102 shares as OCBC has stated that fractional shares will be rounded up to the nearest whole share)

Investors had the option to take the $795 cash, or get 102 additional OCBC shares at a rate of $7.81. If an investor with 5,000 lots opted for the scrip dividends, this would mean that the investor now has 5,102 OCBC shares. 

Why companies offer scrip dividends

By offering scrip, companies encourage current shareholders to continue to invest in the company, to continue holding the shares and gradually grow their holdings in the company. 

It also encourages long-term investing, to have investors that continue to believe in the company, rather than have investors that cash and dash — pulling out their investments and investing in another company instead after they cash out the dividends. 

More importantly, giving out scrip can help companies conserve cash, issuing new shares instead.  

Which companies offer scrip dividends?

It’s difficult to predict which companies will be offering scrip dividends, though some announcements by SGX do provide some insights. 

For example, in July 2020, the MAS called on local banks to not just cap their total dividends per share (DPS) for FY2020, but also offer shareholders the option of receiving the dividends in scrip in lieu of cash.

Based on the companies that have offered scrip dividends in the past, they tend to be strong, dividend yielding stocks that are stable and of a substantial size, having been around for decades. 

Here are some companies that have offered scrip dividends in 2020. 

Dividend Scrip priceDividend payment dateLast traded price (12 Jan 2021) 
DBS$0.18 per share 
$0.18 per share 
29 Dec 2020
5 Oct 2020
OCBC$0.159 per share$7.817 Oct 2020$10.54
UOB$0.39 per share $19.5213 Oct 2020$23.58
CapitaLand Limited$0.12 per share$2.767
20 Aug 2020$3.50
Singtel$0.051 per share$2.42215 Jan 2021$2.45

The scrip price compared to the last traded price appears heavily discounted. However, do note the dates that the scrip was given as the prices were significantly lower at that point in time.

To buy the shares of these companies, start by opening an online brokerage account as well as your CDP account.  

Should you take scrip dividends? 

Reasons to choose scrip dividends

Scrip dividends can be a popular choice for investors — the participation rate for OCBC's scrip dividend scheme was 75.2%. Here’s why scrip shares appeal to investors.

#1 Grow your holdings of the stock in your portfolio 

With scrip, you increase the number of shares you hold. This is one way for you to grow your portfolio without having to execute the trade on your own. It also ensures that rather than using the cash dividend for other non-investment purposes, or letting it sit idle in your bank account, your dividends are continuously reinvested. 

If you have a small portfolio to begin with, the dividends would hardly be enough to pay for something significant, such as the latest iPhone or a gaming chair. Instead, you could continue to grow your investments by taking scrip, to build a portfolio that will compound and reap greater dividends in the future. 

#2 Save on commission fees

When you receive scrip shares, the process is hassle-free. The shares are directly credited into your CDP account, without you having to make a transaction or pay any additional fees, regardless of how many (or how few) shares this might be. 

This could easily save you $25 — a common minimum commission fee charged by brokerages, particularly the ones that are linked to your CDP account. 

If you opt for cash dividends, you inevitably have to pay commission fees when you purchase the company’s stocks in the future. You could also end up purchasing more lots of the stock in order to make your money’s worth. 

#3 Get shares at a discount

Scrip is often priced at a discount to the market price, making it a good deal for investors, particularly ones that are always on the lookout for a dip in the maket to add to their position. 

For example, the OCBC scrip shares were set at a 10% discount and CapitaLand set their scrip at a discount of approximately 5%.

Who should take scrip? 

Take scrip if you... 

  1. Want more shares of the company 
  2. Have confidence that the company has potential for growth
  3. Think the company has the ability to continue rewarding shareholders with the dividends that they’ve been giving out. Why pay the commission fee to purchase the shares when you can get it in your CDP account without having to make a transaction? 

You could also opt for scrip if you don’t have an immediate use for the cash dividends, or if receiving cash will incur opportunity cost – such as letting it sit in a low yield savings account rather than being utilised for another investment.  

Reasons to choose cash dividends instead

#1 Scrip typically come in odd lots 

Opting for scrip usually results in you receiving odd lots (less than 100 shares), especially if you hold a small number of shares to begin with. From the OCBC example above, if you hold 5,000 OCBC shares, you’d receive 102 lots.

Odd lots are more difficult to sell on the open market as there are minimum lot sizes required when buying or selling shares. Small lot sizes are also relatively more expensive to sell as you’d still incur the minimum commission fee.

Instead of receiving odd lots, you could opt for cash instead and use the money to purchase the number of lots you prefer from the open market. 

#2 Avoid increasing your holdings in weak companies

If you think the company has weak growth prospects, or if you don’t have confidence in their business going forward, it could be prudent to limit the number of shares you own. This is particularly so for sunset industries, such as the steel industry, or companies that have been lowering their dividends in recent years. 

#3 Cash can be put to better use elsewhere

It could make more financial sense to accumulate the cash and channel it into investments with higher growth or dividend potential, especially if you think there is little potential for the company’s shares to increase in value. 

#4 If you are dependent on the cash dividends for income 

If you have a need for the cash, or if the cash dividends are a reliant source of your income, cash could be preferred. For example, retirees might depend on the dividends as their income stream, while someone going through a rough patch could do with the additional moolah. 

Who should take cash dividends?

Opt for cash dividends if you’re... 

  1. Fairly sure you can put the cash to better use 
  2. Do not want to own more shares of the company than you already do
  3. Dependent on the cash dividends for your expenditure

While not every company will offer scrip dividends, you can always select companies with strong dividend yield and a history of giving out scrip. To buy the shares of these companies, start by opening an online brokerage account as well as your CDP account.  

Read these next: 
DBS, SIA & Sheng Siong: Beginner’s Guide To Blue Chip Stocks In Singapore
Guide To Real Estate Investment Trusts (REITs), And Whether You’re Ready For It
Uniquely Singaporean Things We Do To Accumulate Wealth
7 Popular Types Of Investment In Singapore (And Tips To Use Them For Optimal Gains)
8 Investment Masters To Follow In 2021 For A Solid Portfolio

A flat white, an adventure-filled travel and a good workout is her fuel. Sue Mae enjoys sharing knowledge on personal finance while chasing the dream of financial independence.


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