Dividend Reinvestment Plan

As the title means, dividend is income declare from the share you purchase. and now it offer you the chance to use this dividend money to buy back the company mother shares.
Purpose of this DRP(Dividend Reinvestment Plan) is to raise up capital or increase the numbers of shares floating. its concept is similar with unit trust. where the dividend declare will be converted into unit, not cash.
*The Reinvestment is only can use dividend money to reinvest. unlike right issue which require you to give additional funding to reinvest.


Example
MBSB declare 5 cents dividend for this year 2018 dividend.

So the DRP offer shareholder to reinvest at price of RM 1.02 ; about 10% lower than current market price. so you will have the choice of to reinvest this dividend money or choose to take cash only.


Scenario 1, you choose to accept the DRP.

Then you will use the DRP form you received and post it back to the share registrar.
in the DRP form it clearly mention total amount of share you can reinvest and remaining will be paid u in cash.

Example :
you have 100,000 unit; 5 cents dividend will be RM 5000; so total numbers of share you can buy is RM 5000 / RM 1.02 (share offer price) = 4900 unit. remaining amount will be convert into cash.

total you can choose to reinvest 4900 unit. but u can choose to reinvest 1000 unit remaining into cash, up to your choice.

Pros
you can buy the share at a discount price of 10% from current market price RM 1.12. so if you choose not to reinvest the market price of MBSB will be impact after the reinvestment unit added into market. (normally will be lower than 1.12)

Cons
As the process to reinvest will require to pos back the reinvestment form to share registrar, so there is a cost of Affix RM 10 + postage fees. (but lucky this round Affix is borne by MBSB, so you save RM 10 just the postage fees require, 80 cents to be paid)


Scenario 2, you choose not to accept the DRP
then you do not need to do anythings, as the pay date due you will received your dividend money.