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Hi, I have had a few enquiries from my broker as to whether I would like to take my dividends as cash or more shares. I have always taken cash in the past but my broker has suggested it might be better to take shares while the prices are low. Is there any advantage aqnd what is the tax implicat...

Question

Hi, I have had a few enquiries from my broker as to whether I would like to take my dividends as cash or more shares. I have always taken cash in the past but my broker has suggested it might be better to take shares while the prices are low. Is there any advantage aqnd what is the tax implication? - Posted by Geoff

Answer

ANSWER 29th November 2008

Hi Geoff,

Yes, it would seem advisable to take shares rather than cash as it is an ideal way to increase your holding while prices are low, especially if you do not need the cash for income. And of course next time you will get dividends on the extra shares so it will compound your return. The tax liability will be exactly the same as taking cash. You should receive a tax voucher showing the liability to tax or tax credits either way. If the shares are held in nominees you should get a Consolidated Tax Voucher at the end of the tax year from your broker. One thing to be aware of, though, is if you decide to sell your shares before you receive the shares in respect of the dividend (It is called a scrip dividend). You must be careful you don't end up with a few shares from the dividend which would be difficult to sell.

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