Martin Lee @ Sg

Another MIIF Scrip Dividend Strategy

It’s that time of the year again when Macquarie International Infrastructure Fund (MIIF) pays out their dividends. About half a year ago, I wrote two lengthy articles on my approach towards the MIIF scrip dividends (or any other scrip dividend scheme for that matter).

MIIF Scrip Dividend

More on MIIF Scrip Dividend

Fast forward six months, the price of MIIF had dropped to historical lows. It reached as low as $0.66 recently. The half-yearly dividend payout for this round is 4.25 cents/share and the scrip dividend pricing was at $0.70.

What this meant was that if someone had 100,000 shares, he could opt to receive either $4250 in cash or 6061 shares. Previously, it was a all-or-nothing either cash or shares option.

Macquarie had just improved their scheme whereby a person can opt for part cash and part scrip. This helps to avoid the problem of odd lots.

Being an owner of some Macquarie International Infrastructure Fund shares, I had originally intended to opt for scrip this time round. After all, at a price of $0.70, the dividend yield (based on 4.25 cents for 6 months) works out to be about 12.1% p.a.

Then it stuck me. As I looked at the live prices of MIIF two days ago and saw that it was trading below $0.70, I thought to myself:

Instead of getting scrip at $0.70/share, shouldn’t I just buy the shares from the open market at a price less than $0.70 and opt for the cash dividend instead?

If I can buy at $0.66, that works out to be a savings of $0.04/share.

Theoretically, all these sounds nice and good. However, in reality, you have to take into account things like brokerage fees, CDP fees, etc. Therefore, it might not work so well for someone with very few lots.

For example, a person holding 16,000 shares could get a dividend of $680, or 971 shares if he opts for scrip dividend. If he can opts for cash dividend and buys MIIF at $0.66, he ends up with 1000 shares and $20. However add in the fees and the $20 will become negative $10.

It’s still worthwhile compared to getting scrip as his overall cost would be $0.69/share instead of $0.70. A savings of $10 based on 1000 shares. 🙂 If he makes use of the opportunity to further increase his holdings, then the marginal cost of acquiring that 1000 shares would be even lower.

At the other extreme, our 100,000 guy would have been easily better off by about $200 if he can buy MIIF on the open market at $0.66 instead of getting the scrip dividend.

Sometimes, it pays to stay vigilant and look out for opportunities no matter how bad current market conditions are. Usually, it is when there is extreme pessimism in the markets that you can find great opportunities.

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