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Paying Your Dividends Through CREST

23 August 2021

Over the last year, we have seen a positive take up by Issuers and a significant increase of dividends paid through CREST. CREST can distribute dividends in pound sterling, euro and dollar to direct holders in CREST (CREST Members).

Two-thirds of FTSE 100 companies' dividends and half of FTSE 250 companies' dividends are already paid via CREST. As a result of the clear benefits that this offers you and your shareholders, EQ is now in the process of offering CREST PAY as the primary dividend payment channel to all our clients.

The adoption of CREST PAY is the next step in the digital dividend journey at EQ. We started removing cheques from dividend payments in 2016 and, by August 2022, we will have replaced around three million cheques per annum – a significant cost and environmental impact.

Many of you are already employing CREST PAY as the primary payment vehicle towards CREST Members, including clients such as Royal Dutch Shell (Shell), Vodafone, Tesco, JPMorgan Investment Trusts, Schroder Investment Trusts, Prudential, Paypoint, and Old Mutual. These Issuers are now paying 95 to 99% of their dividends to CREST Members through CREST.

The benefits of CREST PAY:

Speed, risk and effectiveness

Same-day settlement with no unpayable or unclaimed residue going forward.

Choice of currency

Dividend declaration for non-GBP currency and enhanced expanded currency election and payment options for USD, EUR and GBP.

Efficiency savings

CREST Members are not mailed paper dividend confirmations as they receive those confirmations automatically in CREST.

Proven robustness

Via CREST PAY, a CREST Member can be paid any distribution on any security it may hold at any moment in time in any of its accounts in CREST. This removes the need to arrange individual bank mandates continuously. Consequently, the adoption of CREST PAY will radically reduce the number of unclaimed, unpayable or rejected payments, so a win-win for Issuers and CREST Members alike.

No upper limits

Unlike the £20m BACS limit, there is no upper limit on payment size.

Clear oversight

Better control and transparency via the instant monitoring of settlements through the custodian's CREST GUI.

Working closely with Shell

Shell has championed the benefits of CREST PAY for some time, driving it to become the industry default. Earlier this month, it was awarded a EuroFinance Treasury Excellence Award 2021 for taking the lead in the modernisation of dividend payments.

Support for CREST PAY at Shell grew from previously managing 150,000 dividend cheques per quarter. The team here at EQ has been working closely with Shell to digitise the dividend process and design a robust operation around the distribution of money via CREST. The new system made its first payment in March 2020, and today, the total dividend payments of $1.9bn per quarter are being processed fully electronically within a couple of hours.

"Making greater use of technology and digitalisation has brought real benefits to our shareholders," said Anthony Clarke, Deputy Company Secretary and Paul Vos, Senior Manager in Treasury & Corporate Finance at Shell. "It has also made our ways of working more efficient, reduces our risk exposure, and makes equity markets safer."

Anthony and Paul are now sharing Shell's insights with other companies interested in finding out more.

"CREST PAY is by far the most robust, efficient and cost-effective way to distribute cash across CREST Members. For these reasons, all custodians, which tend to hold over 95% of your equity, urge corporate Issuers to pay their dividends via CREST.

It must also be noted that any cash distribution (other than dividends) originating from corporate actions like capital redemptions, tender offers, acquisition cash proceeds is already exclusively paid via CREST PAY. In fact, the HM Treasury services the interest and the repayment of its gilts, worth over GBP 2 trillion, primarily via CREST. Combined with two-thirds of FTSE 100 dividends already paid through this route, this employment proves the robustness of CREST PAY as a distribution channel."

Find out more

Employing CREST PAY as the primary distribution vehicle to CREST Members for your dividend payments is a straightforward process, and we will discuss this with you as part of your next dividend payment cycle.

Please speak with your Client Relationship Lead if you would like any more information about CREST PAY in general.

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