5J·

Capital Transaction

Good morning, everyone,

What do you think of Rio Tinto’s capital action?

If I understand this correctly, a direct reinvestment would only be worthwhile if the reinvestment price were below the current stock price. But the reinvestment price hasn’t been announced yet...

Will the reinvestment be in newly issued shares? That would lead to earnings dilution and wouldn’t be great for the stock price.

Best regards ✌🏻

6 Commentaires

Dividendenopi👴@Dividendenopi

If you want to reinvest the dividend, that might make sense for you. The net amount—that is, after taxes and the solidarity surcharge have been deducted—is reinvested accordingly. With Rio Tinto, the reinvestment takes place on-market; no new shares are issued. The price is announced after the ex-dividend date and is usually an average price calculated over several trading days around that time. You’ll either receive a separate notification from your broker or can check Rio Tinto’s investor relations (IR) page to see what the price is—it often includes a small discount. You can then decide whether this is of interest to you; that’s why you still have a little time after the ex-dividend date to submit your instructions. This is only necessary if you actually want to reinvest. If you do nothing, the dividend will be paid out automatically. Check to see if you’ll have to pay trading fees—that often makes the whole thing unattractive.

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Christoph@ChrisBizz

@Dividendenopi Thank you so much for your detailed response. It's really helpful 👍🏻

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Dirk aus Stade@dirko68

By the way, that's nothing unusual. At BAT, I'm offered that every time. At Rio Tinto, that's not an option for me, since the dividend must be at least equal to the purchase price of one share. That's not enough for me.

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Christoph@ChrisBizz

@dirko68 This is completely new to me; maybe I just haven't held Rio Tinto in my portfolio long enough to be offered this option.

Oh, and if reinvestment is only possible in whole shares anyway, that's not enough for me either.

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Dirk aus Stade@dirko68

@ChrisBizz At least one whole share, and after that

even fractions. At least that's how it works with
Smartbroker. I don't know how it works elsewhere.

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Markus@_xempex_

I use Scalable’s DRIP (Dividend Reinvestment Plan). It’s basically the same thing, except there are no average prices—instead, Scalable simply executes a free market purchase equal to the net dividend amount.

I like this setup for now. If I end up taking out a loan from Scalable in the future, I’ll stop the DRIP so the money stays in the clearing account and goes toward paying off the loan. ^^

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