Here's What Investors Should Know About OCBC's (SGX: O39) 2020 Fourth-Quarter Scrip Dividend Scheme

It’s now Oversea-Chinese Banking Corp Limited‘s (SGX: O39) (OCBC) turn to announce the price of new shares for its scrip dividend after DBS Group Holdings Ltd (SGX: D05) and United Overseas Bank Ltd (SGX: U11) did so earlier. 

OCBC declared a dividend of S$0.159 per share for its 2020 fourth-quarter, and investors can choose to receive it in cash or via scrip (in the form of shares).

Right here, let’s look at what investors should know about the latest OCBC scrip dividend scheme.

TL;DR: Details About OCBC Scrip Dividend Scheme for the 2020 Fourth-Quarter

Here are some highlights of what’s covered:

• OCBC is allowing investors to receive the 2020 fourth-quarter dividend in the form of shares
• Each new share will be issued at S$11.93 while OCBC shares closed at S$11.90 apiece on 17 May 2021
• Investors have up till 14 June 2021, which is the last day for shareholders to submit their forms, to decide whether to accept their dividend in the form of cash or shares, or both
• They can apply for the new shares via the form sent by CDP or through the SGX Investor Portal

OCBC Scrip Dividend Scheme Details 

Scrip Share Price 

In its 2020 fourth-quarter earnings release on 24 February 2021, OCBC revealed that it’s declaring a dividend of S$0.159 per share and the scrip dividend scheme will be applicable.

This is in line with the MAS guidance for local banks to moderate their dividends for 2020 and for scrip dividend to be made available.

On 17 May, OCBC announced that the price at which each new share will be issued is S$11.93.

The issue price is based on the average of the daily volume-weighted average share prices between 12 May and 14 May 2021. 

Shareholders who held onto OCBC shares as of 14 May (record date) 5pm would be entitled to the dividend.

Timeline for OCBC Scrip Dividend Scheme

The following is the timeline for the latest OCBC scrip dividend scheme:

The Notices of Election and Scrip Dividend Entitlement Advices will contain the information on how to go about applying for the scrip dividend.

On top of submitting a physical copy of the Election Notice, shareholders who have OCBC shares held in their CDP accounts (only for individual and joint alternate-signatory accounts) can choose to make an electronic submission via the SGX Investor Portal. 

How Many New Shares Will OCBC Shareholders Get?

Let’s say you own 1,000 shares of OCBC.

You are entitled to a dividend of S$159 since the declared dividend is S$0.159 per share.

Since the scrip share price is S$11.93, you have the option to get 13.33 new shares in OCBC.

The formula behind this is:

New shares entitled = (S$0.159 x number of shares owned) / S$11.93

OCBC has said that where the number of new shares to be issued includes a fraction, it will be rounded up to the nearest whole number if the fraction is 0.5 or more.

If the fraction is less than 0.5, it will be rounded down to the nearest whole number and the fraction will be disregarded.

No cash will be paid on any disregarded fraction of a share.

Therefore, for the above example, the fraction would be rounded down to 13 new OCBC shares.

OCBC Shareholders Have to Make an Informed Choice 

The price of S$$11.93 at which each new OCBC share will be issued is very close to the last traded share price of S$11.90. 

Unless OCBC’s share price rises way above the scrip price of S$11.93, it’s not enticing to elect for new shares. 

This is because investors can buy from the market at a lower price. But they have to account for the commission charges involved and decide if it’s still worthwhile buying shares from the market.

If investors choose not to accept the dividends in the form of shares, they would see their shareholdings diluted as there’ll be an increased outstanding share count once the new OCBC shares are listed on the stock exchange. 

In any case, shareholders have up till 14 June 2021, which is the last day for investors to submit their forms, to decide on how they wish to receive their dividends.

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Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock. The writer may have a vested interest in the companies mentioned.