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Delivering And Developing Dividend Payments

Wed 28 Sep 2016

Going beyond basic dividend delivery in order to enhance shareholder engagement through the use of innovation

A dividend is one of the key communications from a company to its shareholders. We consider the opportunities to drive further value within dividends and how that value can best be added.

It is well recognised that advances in technology influence changes in expectations and, by the same token, evolving requirements drive advances in technology. Whatever the motivation, we and our clients continue to deliver sustained success in driving take-up by shareholders through an expanding range of dividend solutions.

Working together

We have a shared focus with our clients on consistently delivering and recognise that achieving accurate and timely execution requires teamwork, trust and commitment. There are three elements that are absolutely critical for the successful execution of dividend payments: accuracy of information, timely delivery and clarity of communication. Close collaboration between the planning team and our client contacts is essential.

The Equiniti team has many years of experience in all ranges of different dividend payment types and adds significant value when the opportunities arise; whether launching dividends, or relaunching where a client is returning to dividend payments, or switching from one payment type to another.

Key stages of a dividend payment:

  1. Announcement of intent to pay a dividend
  2. First Proofs due Cash/DRIP
  3. Record Date
  4. Last Election Date
  5. Approval of Funding Request
  6. BACS file release (Last Day)
  7. Dividend Confirmation Documents posted by Second Class mail
  8. Cheques posted by First Class mail
  9. Payment Date/DRIP Purchase Date

Test and learn

The dividend payment is the optimum opportunity to incorporate bespoke corporate messaging, as well as to safeguard shareholders’ interests and promote more economic shareholder behaviour by:

  • advising shareholders if they have any unpresented dividend payments
  • encouraging shareholders to provide their mandate details to enable them to receive the unpresented money and any future dividends faster and more safely

Stakeholder expectations and requirements change and technology advances, which means that notifications benefit from continual enhancement. It does not, however, have to be a case of full-scale change. Incremental changes are effective too and by using a test and learn approach, the value of enhancements can be measured.

By tracking shareholder activity following a payment, it is possible to see which messages have worked and apply this learning to future payments to ensure best practice governance. We circulate the knowledge and experience we gain from working with so many aspirational clients through the client strategy sessions we host.

Changes in regulation

As well as technology advances driving change, a keen eye is kept on potential regulatory matters affecting dividend payment practice. Whilst the Bank of England withdrew its intent to cease cheque payments from 2018, this is still very much an option that could return, as we step into an ever-more automated and virtual world.

The government also made a legislative change last year in the removal of tax from the first £5,000 of dividend income. This came into effect from April this year, so it was important to include a reference to this in dividend notifications and signpost shareholders to HMRC for further guidance. By taking this comparatively simple step of adding useful information to a standard communication, the engagement between PLCs and their shareholders builds.

Innovation – the world moves on and so do dividends

The way in which dividend distributions have been made has endured for a long period of time. We have worked collaboratively with our clients to introduce new ways in which dividends can be paid and managed to the advantage of shareholders and issuers.

The Payment Plus Dividend, launched by Equiniti with M&S, is a new approach to dividend payments where shareholders can choose to receive their payment onto a retail gift card at more than the face value of the dividend. Following the proven success with M&S shareholders, we have further plans to extend the service range.

The Flexible Dual Dividend allows the client to invite shareholders to elect once across all options of a cash only, DRIP or Scrip dividend in the one election notice. The shareholder elects the option they would default to depending on which payment is offered. This allows issuers to switch between payment types depending on their corporate dividend strategy without the need, cost and time to seek singular shareholder elections with each change. In this way, clients have much improved and immediate control over the implementation of any revised dividend policy.

These are two examples of how the need for greater flexibility both on the part of the shareholder and the issuer is met. The shareholder has greater control over their share portfolio strategy and the PLC over its dividend payment strategy.

Mark Bullen, Director, Share Registration Services, Equiniti:

 

We are passionate about effective innovation and seek it from within our own resources, as well as through working collaboratively with our clients and partners.

The delivery of both the Payment Plus Dividend and the Flexible Dual Dividend were industry firsts and truly made Equiniti stand out from its peers; such industry innovation had not happened in 20 years! There is no doubt, however, that it will not be another 20 years before more innovation is introduced.


For further information, please contact Lianne Shoebridge, Head of Payments and Reconciliations, Group Operations Lianne.Shoebridge@equiniti.com