Dividend Reinvestment Question jonnny

#1
Hi All,



UK Expat here with a dividend related question.



I have a small shares account where I ask for all dividends to be reinvested.



Yesterday I got a dividend payment for CTY but in cash not reinvested when I asked the bank they told me that this is because you cannot reinvest back in CTY (I know this to be untrue).



Today I got a dividend in cash for PCI (US) and also got taxed 25%



My question is as my CTY holding is small I received less than 10 pounds in dividends - could it be that there is a minimum amount before I can reinvest.



I know that this is a question for the bank but I am currently living in a less developed part of the world where there are no 'answers' to simple questions and try to discover the answer.



Thanks



J

#2



I have a small shares account where I ask for all dividends to be reinvested.
Originally posted by jonnny


You can ask for all dividends to be reinvested but presumably they are not going to do that for free for any stock in the world and for any amount of dividend that you would like to reinvest. It costs them (time, effort) to place a trade for you on the stock exchange.



So while they might do it for free or for a discounted trading fee on very large stocks with lots of volume (e.g. a major FTSE100 share) because they can group your reinvestment order with other people in the same position, they will not automatically do it for all stocks.




Yesterday I got a dividend payment for CTY but in cash not reinvested when I asked the bank they told me that this is because you cannot reinvest back in CTY (I know this to be untrue).


You can invest in CTY (i.e. the shares are still listed on the stock market, so obviously you can).



However, as it is not a major FTSE100 stock (it only has £1bn of market size), perhaps they do not include it in their dividend reinvestment program.



How do you 'know this to be untrue'? Have you read the detailed terms and conditions of their dividend reinvestment feature of the account and it says 'we will definitely reinvest your dividend receipts no matter how little the dividend is and how obscure the stock is'?






My question is as my CTY holding is small I received less than 10 pounds in dividends - could it be that there is a minimum amount before I can reinvest.


Very likely. The CTY shares are over 4 pounds each to buy. So if you have 'less than ten pounds' (say, 7 pounds or 9 pounds), your money would only be able to afford to buy 1 or 2 shares. So, 1 share for about £4.17 plus stamp duty, or 2 shares for £8.34 plus stamp duty.



It's very unlikely they would have much appetite to reinvest a tiny amount of £4 into a relatively small UK listed company from outside of the UK, unless they were going to charge you a chunk of money to do it. Even if the charge was only £2, it would be half the value of the share you bought, and nobody wants to pay 50% fees, so it's a good job they didn't do that






Today I got a dividend in cash for PCI (US) and also got taxed 25%


US shares typically have 30% withholding tax when dividends are paid to individuals outside the UK . Depending on the country in which you are tax resident, there may be a tax treaty allowing for a lower rate of withholding, if you have filled out a form to apply for it.



For example, UK residents and most other European countries can get access to a 15% rate. China is 10%. India, Israel, Philippines and perhaps others are 25% although this may depend on the type of company it is because the 25% rate might only be available on regulated investment companies or REITs rather than for every company. It depends on the relevant tax treaty.






know that this is a question for the bank but I am currently living in a less developed part of the world where there are no 'answers' to simple questions and try to discover the answer.


It sounds like the 'answer' was, they can't reinvest your 'less than £10' into CTY. You can find out why, by enquiring about the detailed terms of their program, or just, not worry about it.



The recent dividend was about 4p a share, so it sounds like if you got less than £10 you had less than 250 shares, which would have a market value of £1000 or so. Generally the dividends on holdings of £1000 or so are going to be pretty small. It should be no big deal that they don't charge you fees to reinvest those tiny amounts, and instead leave the money in your account. When you next want to buy a decent amount of shares, you can use that 'nearly £10', together with your other money, to do so.



As you had less than £10 the CTY div would have only purchased 2 shares at the most, even if it was fee-free to do that. By not having those 2 shares you will miss out on the potential dividends from them. If the next dividend is 4 pence per shares again, and you don't purchase those shares yourself in time, that's 8 pence of dividend income you've missed, before tax. I wouldn't be losing sleep over that.

#3
Thanks Bowlhead from the comprehensive reply.



Not asking for anything free but am building a dividend reinvestment portfolio and am not getting any answers from the bank I have the portfolio currently (each holding about 4k CTY during ex div date was around 1k). Not the costs for reinvestments, minimum amount, info about their reinvestment plan etc and as such trying to work it out.



With regards to CTY I had a larger holding in the past and had no issue reinvesting the dividend. I suspect the issue is due to the small holding at present.



For sure should the charge for reinvestment be high I am grateful for the dividend cash. I just don't know what the charges are.



US tax is a bummer but it is what it is.



As always I am learning all the time and my main frustration is not being able to get information to help me make informed decisions and the lack of broker options in the country I am in.



Thanks



J

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