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The Post Pandemic Dividend 900X330px

The Post-Pandemic Dividend

Thursday, 22 April 2021

2020 saw a sharp fall in the number of companies issuing dividends as the pandemic hit a peak. In March 2020, The Bank of England (BoE) asked seven of the UK’s biggest lenders to suspend dividends and share buybacks until the end of the year and instead turn attention to cash retention. As the pandemic continued its hold, several other public companies followed suit.

As the UK continues to hit major milestones allowing the relaxation of restrictions, 2021 is the recovery year and we are seeing an uptick in the number of companies looking to issue dividends in the coming months.

With the dividend pipeline growing, we look at some of the trends we see amongst issuers and provide an update on some exciting projects we have worked on for the resurgence.​

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The time for cheque-less

People have relied more on digital services over the last year than ever before. Some companies are looking to continue this movement with their dividends by introducing alternatives to cheque payments.

At EQ, we have eight clients who have made a move to cheque-less dividends, equating to c750,000 cheques being withdrawn from circulation annually. This has been done for a range of reasons, including:

  • Security and cheque as a payment process
    Whilst protecting shareholders and their assets remains a top priority, there are increased risks associated with cheque fraud. Continuing local banking branch closures and reducing expiry periods also diminish the convenience of cheques as a payment process.

  • Environmental impact
    Less paper and less travel reduce environmental impacts.

  • Reducing costs
    For those with larger shareholder bases removing cheques from the process reduces operational costs associated with mailing and stationery. In addition removing cheques also removes the requirement to proof the related dividend stationery.

    Before making any decisions on the move to cheque-less, it might be worth assessing your shareholder base to understand the population and their likelihood to adopt the move. If you want to know more about how we can help, please speak to your Client Relationship Lead.

DRIPs and SCRIPs are back

Companies are also looking at the dividend return as an opportunity to drive other changes, such as providing DRIP or SCRIP reinvestment options. Both are share alternatives to the regular cash dividend that is paid to shareholders. Currently, just under a third of EQ clients offer a reinvestment option.

The DRIP uses the cash dividend to purchase additional shares in the open market (the cash dividend is paid to the shareholder who in turn instructs us to buy further shares on their behalf). In contrast, the SCRIP allots shares to the participating shareholders to the cash dividend's equivalent value (and the company retains the cash equivalent).

What are the similarities?


Reinvesting via DRIP typically enables shareholders to increase their shareholding through regular purchases of additional shares at a significantly reduced rate to those of a typical market transaction, whereas SCRIP enables shareholders to increase their holding absent of any dealing fees or stamp duty.


Building in some additional options to cash payments for your shareholders can be a great way to re-engage or break any period of inactivity, which may be the case when dividends were cancelled. It is also an opportunity to increase loyalty, providing shareholders with the chance to further invest in the company's future growth.


Both have cost up-sides. The DRIP purchase is subject to a minimum level commission payment and stamp duty charge, and the SCRIP allotment is free to shareholders (with the PLC covering management costs).


Similar to the cheque-less dividend, for those that offer a Corporate Sponsored Nominee, re-investment of the dividend removes the associated costs with issuing paper.


Both are a good alternative for many overseas shareholders who may incur high charges to exchange payments into local currencies.

What are the differences?


Operating a SCRIP provides the significant benefit of enabling the retention of cash within the business which would otherwise have been paid as a dividend, whereas a DRIP payment is the equivalent of a cash payment.

In terms of operational cost, to operate the market purchase element of the DRIP provides an opportunity to pass on all or some of the costs to the shareholder whereas the cost is covered in full by the company when operating SCRIP.

Capital headroom will also need to be considered and managed when operating a SCRIP scheme.


DRIP is an FCA regulated service but does not require shareholder approval. SCRIP is not regulated but does require shareholder approval due to the potential effect of the dilution of share capital.


As a regulated product, DRIP participants must be issued a quarterly statement, to minimise costs, statements are typically issued alongside the dividend payment or digitally via EQ’s document repository in periods of non-payment.


DRIP will have no impact on share buyback programmes, whereas SCRIP payments would appear to be a conflicting strategy to share buyback.

Enhancing the dividend management process at EQ

Chequeless Dividends

In addition to supporting many of our clients navigate the removal of cheques or implement DRIP or SCRIP alternative in 2020, at EQ, we took the opportunity to work on some exciting projects to enhance the dividend management process for both corporates and their shareholders. Here is what we have been up to.

Refreshed dividend stationery

Over the last 12 months, we have been updating our dividend stationery to create simple and straightforward communications for shareholders.

Working with research agencies, clients and drawing in experts from all over EQ, we've focussed on three main objectives:

  • Simplify the stationery to focus on clear, uncomplicated language
  • Promote the use of self-service options available to shareholders 24/7
  • Reduce calls relating to dividend queries to the Customer Experience Centre

We're looking forward to sharing the work with you, and if you'd like a sneak preview, please speak with your Client Relationship Lead or get in touch here.