Dividend payouts.

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Hey guys,

My question is when a company pays out dividends (BNS.to) if you choose to reinvest the cash into DRIP’s to get additional shares. Where do those shares come from? Are those new shares issued by the company which would add existing shares to the total of outstanding shares. Or does the company buy back shares from the open market? I hope my question makes sense. I don’t explain things as well as I could in person! Just curious how this process works. Thanks

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Asked on January 21, 2021 6:36 pm
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Private answer

Hi Jagjit,

If you are signed up with a DRIP through your discount broker - the news shares are typically bought on the open market and it is what is referred to as a synthetic DRIP. THere are cases however, where the broker may sign up to the company's DRIP through its transfer agent and get the shares directly from the company. You can also do the traditional DRIP by signing up with the company's transfer agent yourself, but it is a more cumbersome process and not available in registered accounts. When this happens, shares are issued from treasury and has the net effect of share dilution.

Mat

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Posted by Mathieu Litalien
Answered on January 22, 2021 4:52 am
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