Last spring, I owned shares in a Dutch company, and for the dividends of that company, I should have been able to choose whether to reinvest them directly in the company or receive them as cash. Now, the same situation applies to the British insurance company Aviva. If I recall correctly, those Dutch shares were with Nordnet, and I don’t think I ever received any message about being able to choose; instead, the dividends were paid as cash to my account without any questions. Now, this British company is in my Mandatum investment account, and I receive messages daily about the choice, but I just don’t know how to do it. I’d gladly leave the money to accrue interest in the same company; I just can’t figure out who to inform and how. Can anyone advise?
"Voluntary corporate action
Update voluntary event for your attention:
Security name:Aviva Plc.
Event ID:8681585.
Event name:Dividend Reinvestment.
Ex date:26-Aug-2021.
Effective date:26-Aug-2021.
Deadline for electing:14-Sep-2021."
Well then… I guess I could have checked Aviva’s website myself first, the information was there. According to these instructions, dividend reinvestment is not possible for EU presidents under the DRIP (Dividend Reinvestment Plan) program, so let’s just drink the money.
"Join our Dividend Reinvestment Plan (DRIP). This option lets you use your dividends to buy more Aviva ordinary shares, instead of taking them as cash.
There’s no entry fee and you can leave at any time at no charge. If you join you will pay commission, currently at 0.75% (subject to a minimum of £2.50), and stamp duty reserve tax, currently at 0.5%, on the market value of the Aviva ordinary shares we buy for you with your dividend payments. You can find full details in the DRIP terms and conditions.
If you’d like to join, do it online or by completing a form available from Computershare. You need to join at least 15 working days before a dividend payment date, or you’ll have to wait until your next dividend payment to get started.
Please note: our DRIP is available to ordinary shareholders and members of the Aviva Share Account. Our service is for shareholders in the UK and some countries outside Europe. This service is not available to shareholders resident in the European Union."
I don’t think any company on the Finnish stock exchange has such a dividend system where shareholders can choose to have shares bought for them with dividends? Would such a thing be tax-efficiently implementable in Finland?
As I understand it, the tax authorities take the dividend tax, which is why it’s not popular around here. With an equity savings account (OST-tili), this could theoretically work, but I guess no one has looked into it yet?
Is the purpose of this DRIP (Dividend Reinvestment Program) to avoid dividend taxation? Back in the day in America, this sparked a debate and legal battle over what constitutes taxable income when the tax authorities wanted to tax shares received as dividends. The court ruled that only cash is taxable income.
I highly recommend continuing your investment hobby, at least for now, through low-cost funds or ETFs. Successful direct stock investing initially requires a pretty good level of knowledge, which accumulates over time.
That’s exactly what I’m doing, accumulating knowledge, so thanks for the tip. But perhaps you could also help more concretely with knowledge accumulation: Why is Aviva’s dividend reinvestment arrangement managed by Computershare not allowed for EU residents? Is there some legal technicality? Others are welcome to answer if anyone knows.
My curiosity was also piqued by what you mean by “at least for now” one should switch from direct stock investments to funds?
In investing, I encourage playing it as safe as possible and actively avoiding losses so that the hobby doesn’t end due to negative experiences. The basic scenario with dividends is: the company pays dividends on a certain date, and the recipient reinvests them or uses them for something else. Therefore, there is no direct option to refuse to accept dividends.
In Inderes’ discussions, there are quite a few of us who are more experienced investors and whose main focus in stock investing is successful stock picking. It is precisely the search for information in stock picking that has brought us here. If it’s about company-specific special cases, as it is here, the right answer is not necessarily to preach the basics of investing.