scrip dividend
C1Business, Finance, Formal
Definition
Meaning
A dividend paid to shareholders in the form of additional shares of the company, rather than cash.
A corporate action where a company issues new shares instead of cash to distribute profits. It may be offered as an option alongside a cash dividend, or as a mandatory issue, increasing the number of shares outstanding and diluting earnings per share.
Linguistics
Semantic Notes
The term 'scrip' historically refers to a provisional certificate of value, such as a share certificate. In this compound, it specifies the form of the dividend. It is often used contrastively with 'cash dividend' or 'stock dividend' (though 'stock dividend' is a near-synonym).
Dialectal Variation
British vs American Usage
Differences
No significant difference in meaning. The term is standard in both financial lexicons.
Connotations
Neutral financial term in both regions.
Frequency
Equally common in UK and US specialist financial contexts.
Vocabulary
Collocations
Grammar
Valency Patterns
[Company] + paid/offered/issued + a scrip dividend + [to shareholders].Shareholders + elected for/took + the scrip dividend + [option].Vocabulary
Synonyms
Neutral
Weak
Vocabulary
Antonyms
Usage
Context Usage
Business
The board decided to conserve cash by offering a scrip dividend this quarter.
Academic
The paper analyses market reactions to announcements of scrip dividend programmes.
Everyday
Rarely used; an investor might say, 'I took the extra shares instead of cash.'
Technical
The scrip dividend will be issued at a 5% discount to the average market price, calculated ex-dividend.
Examples
By Part of Speech
verb
British English
- The company will scrip dividend its interim payment.
- Shareholders can choose to be scrip dividended.
American English
- The firm scrip-dividended its annual payout.
- Investors were scrip dividended.
adjective
British English
- The scrip-dividend option was popular.
- They reviewed the scrip dividend programme.
American English
- The scrip dividend plan was well-received.
- He studied the scrip-dividend policy.
Examples
By CEFR Level
- The company gives shareholders more shares instead of money. This is called a scrip dividend.
- To preserve cash, the board proposed a scrip dividend as an alternative to a cash payment.
- Many long-term investors elected for the scrip dividend, valuing the opportunity for compound growth over immediate income.
Learning
Memory Aids
Mnemonic
Imagine a SCRIPT for a play where the payment (dividend) to the actors is more roles (shares) in the next production, not cash. Scrip Dividend = Share Script.
Conceptual Metaphor
PROFIT IS FOOD: A cash dividend is ready-to-eat food; a scrip dividend is seeds to grow more food later.
Watch out
Common Pitfalls
Translation Traps (for Russian speakers)
- Avoid translating 'scrip' as 'скрипт' (script/computer code). The correct financial term is 'дивиденды акциями' or 'безналичные дивиденды'.
Common Mistakes
- Incorrect: 'script dividend' (wrong spelling).
- Incorrect: Using it to refer to any dividend from a script company.
- Incorrect: Treating it as a synonym for 'special dividend'.
Practice
Quiz
What is the primary characteristic of a scrip dividend?
FAQ
Frequently Asked Questions
No, it does not involve a cash outflow. It issues new shares, which dilutes existing ownership but conserves company cash.
Not exactly. A bonus issue (or stock split) capitalises reserves and is free to all shareholders. A scrip dividend is a distribution of profit where shareholders often have a choice between cash and shares.
Companies benefit by retaining cash. Shareholders who choose shares benefit from potential future growth and avoid transaction costs of reinvesting a cash dividend.
Tax treatment varies by jurisdiction. Often, it is treated similarly to a cash dividend for income tax purposes, with the share value considered taxable income. Always consult a tax advisor.