A few months ago I posted about BACIT (Battle Against Cancer Investment Trust) and suggested that I was considering buying shares in it. Well I did buy those shares and so was pleased when they recently announced that a dividend equivalent to 2.10p would be paid on 19 August. Unfortunately, I was not so pleased when I found out that TD Waterhouse would not be making this cash dividend available to their clients.
Dividend Details
BACIT have offered shareholders the choice of taking the dividend either in cash or in the form of new shares. Unless shareholders request the cash, then the dividend will be paid in shares. The number of shares you receive is calculated as follows:
(Number of Existing Shares Held x 2.10p) / NAV on 30 June = 123.52p
The result is then rounded down to the nearest whole number and any remaining cash will be retained by the company (see their Dividend Announcement for details).
Shareholders who want to receive their dividend in cash need to notify the company by 5:00 pm on Monday 3rd August.
TD Waterhouse
I would rather receive my dividend in cash than additional shares because the “rounding down” would seem to leave money on the table and because I like having regular investment opportunities, and dividend income provides those. Having read the announcement on BACIT’s website I therefore contacted TD Waterhouse a couple of weeks ago to inform them of this preference. They asked me to keep on eye on the Corporate Actions page of my account and told me that, if nothing had appeared there after a week, then I should contact them again. Nothing appeared and so I did contact them again and my request (to take the cash dividend) was at that point forwarded to their Corporate Actions department. I assumed that it would be put into effect accordingly and did not hear back from them.
Yesterday (Friday 31st) I noticed that a Corporate Action notification had appeared on my account stating that BACIT shareholders would be given a stock dividend. No mention was made of a cash dividend option and when I rang TD Waterhouse they stated that for “business reasons” they had decided not to extend the cash dividend offer to their BACIT shareholders.
Conclusion
TD Waterhouse has offered me a free transaction to sell my BACIT shares in light of my attempts to contact them on this subject and their internal decision to not make the cash option available. Needless to say, I am not going to sell my shares because of this alone, but I would definitely rather collect the cash dividend so that any future decisions to add to my BACIT holding are made at my own discretion and there were no need to “round down” my cash!
I am not very happy with TD Waterhouse’s “business decision” here, which strikes me as being a bit lazy and opportunist. Are other brokers handling this in the same way? (I would be interested to hear from other BACIT shareholders.)
Finally, with regard to the stub cash that will accrue to BACIT from the rounding down of various shareholders’ awards, would it not be better if this were donated to the charities rather than being retained by the company? Does the company retaining this cash not just transfer further benefit to those shareholders (with harder-working brokers) who have already received the full value of their dividend entitlement in cash at the expense of those who haven’t?
Disclosure: Long BACT.
Disclaimer: This post is not a recommendation to either buy or sell. Please consult your investment advisor.