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US Shares - Cash or Scrip for Dividends

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  1. #1

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    US Shares - Cash or Scrip for Dividends

    I occasionally have this kind of emails, and I don't know where to find this information. I wonder if anybody can help me.

    This time it is the dividend from RQI (COHEN STEERS QUALITY INCOME REALTY FUND INC SHS QUALITY INCOME) and I have the choice of either receiving the cash (default option) or receiving new securities. The problem is that I don't know what price I will be charged for the new securities. I asked the broker, and he doesn't seem to have a clue. I check the website of Cohen Steers, and I can't find the information. Is there some website where this kind of information can easily be found, not only for RQI, but also for other stocks?

    Thank you!


  2. #2

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    I had the same thing with the LINK REIT divident (which I invested in recently). It offered me the choice of cash, or new issues.

    I understand it's generally offered at a discount, so went for the shares option.

    But agree, it's strange that there's no price mentioned.

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  3. #3

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    Quote Originally Posted by john_1122:
    RQI (COHEN STEERS QUALITY INCOME REALTY FUND INC SHS QUALITY INCOME) and I have the choice of either receiving the cash (default option) or receiving new securities.
    Serious question - what broker / bank are you with?

    Would be very curious to see what you end up with - given WHT related issues. Do they take out the 30% WHT and give you shares for the remaining amount?

    Since this is a CEF... - What about return of capital / long gain type distribution components - are they processed in cash? (not familiar with RQI distributions).

    (Renaming this thread - and I hope you do give us some follow up as it might be an interesting case to follow)

  4. #4

    For HK listed shares, the dividend reinvestment price/scrip dividend election price will be set and known some time after the shares go ex-dividend but before you have to make an election so you will know before you have to make a decision.

    It's usually some kind of average of the daily ex-dividend prices over a period of a few or several days less a small discount.

    For shares held in HSBC and BOCHK, you just log on, go to your investments page and click on "corporate actions" to find the price for the new shares and can then either make an election or do nothing, in which case you will get the default option (which could be either cash or shares - it varies from company to company).

    You can also go to the company website and look under investor relations for the announcement stating the price (which is required under Stock Exchange Rules).

    As an example, LINK REIT announced the reinvestment price of HK$62.673 on 7th July with the deadline for submitting election notices to the share register of 4:30 pm on 15th July. NOTE: if you hold through a bank or broker you will have to make your election a bit earlier to give the bank time to get it to the share register in time.

    https://www.linkreit.com/linkcorp/ap...102158f5f4e935

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  5. #5

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    Here's why I am particularly curious about this CEF.

    Their distributions are classified as follows: (not seen their tax docs etc... just random searches)

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    In their N-14 filing (like most funds) ...

    Capital gain dividends and any amounts retained by the Fund which are designated as undistributed capital gains will not be subject to U.S. tax at the rate of 30% (or lower treaty rate) unless the foreign stockholder is a nonresident alien individual and is physically present in the United States for more than 182 days during the taxable year and meets certain other requirements. However, this 30% tax on capital gains of nonresident alien individuals who are physically present in the United States for more than the 182-day period only applies in exceptional cases because any individual present in the United States for more than 182 days during the taxable year is generally treated as a resident for U.S. income tax purposes; in that case, he or she would be subject to U.S. income tax on his or her worldwide income at the graduated rates applicable to U.S. citizens, rather than the 30% U.S. withholding tax. In the case of a foreign stockholder who is a nonresident alien individual, the Fund may be required to withhold U.S. income tax on distributions of net capital gains unless the foreign stockholder certifies his or her non-U.S. status under penalties of perjury or otherwise establishes an exemption (generally by providing an Internal Revenue Service Form W-8BEN).
    This is why I am very curious to see how your broker / bank / whatever intermediary (please let us know who it is) handles the DRIP....

  6. #6
    Quote Originally Posted by john_1122:
    I occasionally have this kind of emails, and I don't know where to find this information. I wonder if anybody can help me.

    This time it is the dividend from RQI (COHEN STEERS QUALITY INCOME REALTY FUND INC SHS QUALITY INCOME) and I have the choice of either receiving the cash (default option) or receiving new securities. The problem is that I don't know what price I will be charged for the new securities. I asked the broker, and he doesn't seem to have a clue. I check the website of Cohen Steers, and I can't find the information. Is there some website where this kind of information can easily be found, not only for RQI, but also for other stocks?

    Thank you!
    Okay, so I spent about 15 mins poking around Cohen & Steers' website and filings for RQI and drew a blank on the reinvestment price. I suggest writing to the fund manager and simply ask where you can find it.

  7. #7

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    Quote Originally Posted by traineeinvestor:
    Okay, so I spent about 15 mins poking around Cohen & Steers' website and filings for RQI and drew a blank on the reinvestment price. I suggest writing to the fund manager and simply ask where you can find it.
    Edgar has this...

    The fund has a dividend reinvestment plan (the “Plan”) commonly referred to as an “opt-out” plan. Each common shareholder who participates in the Plan will have all distributions of dividends and capital gains (“Dividends”) automatically reinvested in additional common shares by The Bank of New York Mellon as agent (the “Plan Agent”). Shareholders who elect not to participate in the plan will receive all Dividends in cash paid by check mailed directly to the shareholder of record (or if the shares are held in street or other nominee name, then to the nominee) by the Plan Agent, as dividend disbursing agent. Shareholders whose common shares are held in the name of a broker or nominee should contact the broker or nominee to determine whether and how they may participate in the Plan.

    The Plan Agent serves as agent for the shareholders in administering the plan. After the fund declares a Dividend, the Plan Agent will, as agent for the shareholders, either (i) receive the cash payment and use it to buy common shares in the open market, on the NYSE or elsewhere, for the participants’ accounts or (ii) distribute newly issued common shares of the Fund on behalf of the participants.



    A. The Plan Agent will receive cash from the fund with which to buy common shares in the open market if, on the Dividend payment date, the net asset value (“NAV”) per share exceeds the market price per share plus estimated brokerage commissions on that date. The Plan Agent will receive the Dividend in newly issued common shares of the fund if, on the Dividend payment date, the market price per share plus estimated brokerage commissions equals or exceeds the NAV per share of the fund on that date. The number of shares to be issued will be computed at a per share rate equal to the greater of (i) the NAV or (ii) 95% of the closing market price per share on the payment date.


    B. If the market price per share is less than the NAV on a Dividend payment date, the Plan Agent will have until the last business day before the next ex-dividend date for the common stock, but in no event more than 30 days after the Dividend payment date (as the case may be, the “Purchase Period”), to invest the Dividend amount in shares acquired in open market purchases. If at the close of business on any day during the Purchase Period on which NAV is calculated the NAV on Dividend payment date equals or is less than the market price per share on such day plus estimated brokerage commissions, the Plan Agent will cease making open market purchases and the uninvested portion of such Dividends shall be filled through the issuance of new shares of common stock from the Fund at the price set forth in paragraph A above.
    Participants in the Plan may withdraw from the plan upon notice to the Plan Agent. Such withdrawal will be effective immediately if received not less than ten days prior to a Dividend record date; otherwise, it will be effective for all subsequent Dividends. When a participant withdraws from the Plan or upon termination of the Plan as provided below, certificates for whole common shares credited to his or her account under the Plan will be issued and a cash payment will be made for any fraction of a common share credited to such account. If any participant elects to have the Plan Agent sell all or part of his or her shares and remit the proceeds, the Plan Agent is authorized to deduct a $15.00 fee plus $0.10 per share brokerage commissions.

    The Plan Agent’s fees for the handling of reinvestment of Dividends will be paid by the fund. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent’s open market purchases in connection with the reinvestment of Dividends. The automatic reinvestment of Dividends will not relieve participants of any income tax that may be payable or required to be withheld on such Dividends.

    The fund reserves the right to amend or terminate the Plan. All correspondence concerning the plan should be directed to the Plan Agent at 800-432-8224.

    Board approved: February 23, 2009
    https://www.sec.gov/Archives/edgar/d...1/dex9917b.htm
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  8. #8
    Quote Originally Posted by shri:
    Interesting - a case of "heads I win, tails I also win" - a rare thing for investors.

  9. #9

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    I am with Julius Baer. While they said they don't know the price, they wrote "It’s an optional dividend which one will receive either in cash or securities (you don’t pay for the securities as it’s a dividend , but stamp duty might apply)."

    So they mean don't pay for the fees to buy these securities, right? I think it makes sense, so I save the 30% of taxes.

    @traineeinvestor, what do you mean??


  10. #10
    Quote Originally Posted by john_1122:
    I am with Julius Baer.
    @traineeinvestor, what do you mean??
    If I've read it right (never something to take for granted), the filing which Shri unearthed says that:

    1. if the market price is below the fund's NAV then your dividend will be reinvested by buying existing units at the market price - you win by getting a discount to NAV; and

    2. if the market price is above NAV then you get issued new units at NAV - you win by getting a discount to the market price.

    I'd assume that this mechanism would result in the market price being fairly close to the NAV?

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