DRIP

A Dividend Re-Investment Plan (DRIP) is a reinvestment plan offered to existing shareholders of certain companies who pay out dividends in cash.

 

ABN AMRO Corporate Banking (ABN AMRO CB) is a specialized division within ABN AMRO which provides DRIPs for various companies. In all cases, it concerns companies which have their main listing on the Dutch stock exchange (NYSE Euronext Amsterdam).

The list of companies for which ABN AMRO CB provides DRIPs can change. We currently offer DRIPs for the following companies:

  • Aalberts Industries
  • ABN AMRO
  • Brunel 
  • Intertrust
  • RELX
  • SBM Offshore
  • Shell (Royal Dutch Shell)
  • Unilever
  • Wolters Kluwer

Existing shareholders of these companies can take part in DRIPs provided by ABN AMRO CB through their bank or broker. ABN AMRO CB informs these banks and brokers via the Euroclear Nederland communication channel.

As an investor at ABN AMRO, we offer you the possibility of taking part in the DRIPs provided by ABN AMRO CB. Does a company have an agreement with ABN AMRO CB on a DRIP and does that company pay out a cash dividend? Then, after deducting dividend tax, ABN AMRO will ensure that it reinvests the cash dividend you were paid in shares of that company. At some companies, this can also occur for depositary receipts, but for the sake of convenience we will only talk here about shares.

As an investor at ABN AMRO, you can choose for DRIPs as a general option. This option applies to all shares in your investment account for which you can be offered a DRIP. You do not have to choose per dividend pay out whether or not to take part. You can always change your choice for DRIP.

With DRIPs offered by other institutions than ABN AMRO, you will always receive dividend in cash. 

If providers offer you DRIPs for their investment funds listed on the Dutch exchange (Euronext Fund Services), your general choice for dividend will apply. Later on, you will read more about these investment fund DRIPs.

Is DRIP the same as a stock dividend or optional dividend?

DRIPs are not the same as stock dividends or optional dividends.

  • With stock or optional dividends, the company itself will offer to reinvest any dividends in the company's new shares.
  • With a DRIP, ABN AMRO offers to reinvest the dividend, not the company itself. Also, DRIPs do not deal in newly issued shares, but with buying previously issued shares.

How does a DRIP work?

Do you take part in a DRIP? Then it works as follows:

  • We deduct 15% dividend tax and credit the remaining dividend amount to your payment account. This is the net dividend amount (gross dividend amount minus 15% dividend tax equals net dividend amount);
  • ABN AMRO CB buys shares for all DRIP participants on a stock exchange. Purchase of shares takes place after the ex-dividend date, but before the payment date. Purchase of shares may take place on one or more trading days;
  • ABN AMRO CB calculates the purchase price of shares;
  • ABN AMRO credits your designated shares to your investment account;
  • ABN AMRO will debit purchase price plus costs from your current account.
  • You will receive a separate DRIP investment receipt.

ABN AMRO requires you to give your permission and instruction for a DRIP

ABN AMRO CB spreads the buying of shares over several days. ABN AMRO CB first transfers shares purchased on the stock exchange to an account in the name of ABN AMRO. ABN AMRO then transfers shares designated for you to your investment account, minus purchase price and reinvestment costs. Because ABN AMRO CB first holds the purchased shares in its own account, your purchase order is characterized as an ‘over the counter’ (OTC) order. If you choose for a DRIP, you instruct us to carry out your purchase orders for DRIPs in this way. We need your one-time permission and instruction to carry out DRIP OTC orders on your behalf.

What price do I pay for the shares?

ABN AMRO CB calculates the average price at which it purchased the shares. This is done with the usual VWAP calculation in the market (Volume Weight Average Price). You pay this average purchase price per share, which we call the reinvestment price. The reinvestment price may be a different price than the price you would have paid for the share had you bought it yourself on the stock exchange. Whether the reinvestment price is lower or higher, of course, you can only know afterwards.

How is the number of shares I get determined?

In the Netherlands, investors are liable for 15% dividend tax. The amount we reinvest for you is the net dividend amount which was previously paid to you. This is the gross dividend amount minus the dividend tax due.

We determine the number of shares that we credit to your investment account by dividing the net dividend amount by the reinvestment price plus costs:

net dividend amount / (reinvestment price + costs) = number of shares to be purchased

To give the following example:

  • Let’s say you have 100 XYZ shares in your investment portfolio.
  • The net dividend (gross dividend minus dividend tax) is 5 euros per XYZ share.

It therefore follows that:

  • The net dividend amount is 500 euros (100 XYZ shares x 5 euros).
  • ABN AMRO transfers 26 XYZ shares to your investment account (500/19 is 26.3157895, rounded down this is 26 shares).
  • There will still be 0.3157895 share, we call this a fraction. We pay fractions in money. In this case we credit 6 euros (0.3157895 x 19 euros) to your current account. 

For the net dividend amount of 500 euros in this example, you would therefore receive 26 XYZ shares and 6 euros.

  • The reinvestment price plus costs is 19 euros.

What are the reinvestment costs?

For a DRIP, you pay a certain percentage to cover costs. At present, these costs for DRIP amount to 0.375% of the net dividend amount. Usually the costs are not exactly 0.375%, due to rounding differences the percentage may be slightly above or below this. You do not pay any costs for the fractions that you receive in cash.

Would my taking part in DRIP be beneficial for me?

In answering this question, we will assume you want to increase your shares in companies for which DRIP is offered by reinvesting the cash dividends you receive back into those same companies.

DRIP offers you convenience. You don’t need to do anything to reinvest. We ensure that net dividend amounts paid out are reinvested each time in shares of those companies. This increases your invested capital and you receive dividends on more shares with each subsequent dividend payment. This creates the so-called ‘dividend-on-dividend’ effect.

Is participating in DRIP financially beneficial for you? As stated earlier, you never know beforehand whether the purchase price will be higher or lower than the price you might have paid if you had bought the shares yourself. So we cannot answer this question in terms of the purchase price alone.

We also cannot answer for taxation issues a DRIP may have for you. ABN AMRO does not provide tax advice. We advise you to contact a tax advisor for questions on taxation.

Whether DRIP is financially beneficial for you also depends on the costs you pay for a DRIP. These costs might be higher or lower than the costs you would pay if you bought those shares yourself on the stock exchange. From a cost perspective, DRIP would be beneficial to you providing its costs are lower than costs for a normal purchase order. Your investment type is important for this. You can find an explanation for your investment type(s) below.

 

Independent investing

Self-directed Investing Basic

For a normal purchase order, you pay: 

domestic shares: €5 + 0.05% on the value of the order, per order.

For a DRIP, you pay: 

0.375% on the net dividend amount.

Whether DRIP is beneficial from a cost perspective depends on the level of the net dividend amount on which you pay costs. In addition, the higher the net dividend amount, the more costs you pay with DRIP.

You can see below how this works out with a net dividend amount between 1,000 and 2,500 euros.

Net dividend amount Normal costs DRIP costs

€1,000,00

€ 5.50

€3.75

Net dividend amount Normal costs DRIP costs

€1,539.00

€5.77

€5.77

Net dividend amount Normal costs DRIP costs 

€ 2,500.00

€6.25

€9.38

So from 1.540 euros on, DRIP works out more expensive than a normal purchase order.

To give you an idea of when you reach this crossover point:

Let’s say the price of a share is €41.50 and that the net dividend per share is €0.33. Then the crossover point of €1,539 equals an investment of approximately €193,514 in that share. In this example, this equals 4,663 shares (€1,539 / €0.33 = 4,663 and 4,663 x €41.50 = €193,514).

The costs in this example may change. Please go to Self-directed Investing Basic for the current costs.

Self-directed Investing Plus

For a normal purchase order, you pay: 

€4.00 per order + 0.04% on the value of the order, up to a maximum of 150 euros.

For a DRIP, you pay: 

0.375% on the net dividend amount.

Whether DRIP is beneficial from a cost perspective depends on the level of the net dividend amount on which you pay costs. In addition, the higher the net dividend amount, the more costs you pay with DRIP.

You can see below how this works out with a net dividend amount between 1,000 and 2,500 euros.

   

Net dividend amount Normal costs DRIP costs

€1,000.00

€4.40

€3.75

Net dividend amount Normal costs DRIP costs

€1,195.00

€4.48

€4.48

Net dividend amount Normal costs DRIP costs 

€2,500.00

€5.00

€9.38

So from 1,196 euros on, DRIP works out more expensive than a normal purchase order.

To give you an idea of when you reach this crossover point:

Let’s say the price of a share is € 41.50 and that the net dividend per share is € 0.33. Then the crossover point of € 1,195 equals an investment of approximately € 150,271 in that share. In this example, this equals 3,621 shares (€ 1,195 / € 0.33 = 3,621 and 3,621 x € 41.50 = € 150,271).

The costs in this example may change. Please go to Self-directed Investing Plus for the current costs.

Self-directed Investing (Only applicable for existing Self-directed Investing portfolios, this investment service can’t be opened anymore.)

For a normal purchase order, you pay: 

€6.50 per order + 0.10% with a minimum of 10 euros and a maximum of 150 euros.

For DRIP, you pay: 

0.375% on the net dividend amount.

Whether DRIP is beneficial from a cost perspective depends on the level of the net dividend amount on which you pay costs. In addition, the higher the net dividend amount, the more costs you pay with DRIP.

You can see below how this works out with a net dividend amount between 2,000 and 3,500 euros.

  

Net dividend amount Normal costs DRIP costs

€1,000.00

€10.00

€3.75

Net dividend amount Normal costs DRIP costs

€2,667.00

€10.00

€10.00

Net dividend amount Normal costs DRIP costs 

€3,500.00

€10.00

€13.13

So from 2,668 euros on, DRIP works out more expensive than a normal purchase order.

To give you an idea of when you reach this crossover point:

Let’s say the price of a share is €41.50 and that the net dividend per share is €0.33. Then the crossover point of €2,667 equals an investment of approximately €335,361 in that share. In this example, this equals 8,081 shares (€2,667 / €0.33 = 8,081 and 8,081 x €41.50 = €335,361).

Execution Only Desk

For a normal purchase order, you pay 0.2%.

For DRIP, you pay 0.375% on the net dividend amount.

Costs for DRIP are higher than costs for a normal purchase order. You are therefore paying extra for the convenience of DRIP for our taking care of reinvestment on your behalf. Of course, you can decide whether to choose for the convenience of DRIP or whether to reinvest the dividend yourself.

The costs in this example may change.

 

Investing with advice (investment advice)

Several investment options are available within investment advice, two types of cost structures can apply:

  • Advice costs including transaction costs.
  • Advice costs excluding transaction costs.

Advice costs including transaction costs

For most investment services in advice you pay advice costs, these costs include among others the costs for transactions on equities. Re-investment costs however are not included in the advice costs. With DRIP, you pay 0.375% on the net dividend amount. You are therefore paying extra for the convenience of DRIP, for us taking care of reinvestment on your behalf. Of course, you can decide whether to choose for the convenience of DRIP or whether to reinvest the dividend yourself.

Advice costs excluding transaction costs

For some investment services you pay both advice costs and then also pay transaction costs separately. For a normal purchase order in equity, you pay 0.2% transaction costs. For DRIP, you pay 0.375% on the net dividend amount. Reinvestment costs for DRIP are higher than transaction costs for a normal purchase order. You are therefore paying extra for the convenience of DRIP, for us taking care of reinvestment on your behalf. Of course, you can decide whether to choose for the convenience of DRIP or whether to reinvest the dividend yourself.

The costs in this example may change. Please go to Investing with advice for the current costs.

 

How to participate in DRIP

To inform us of your choice for DRIP, please take the following five steps:

  1. Log in to Internet Banking .
  2. Select the investment account which is applicable to your choice. If there are more than one, please go through these five steps for each applicable investment account.
  3. Select ‘Product settings’. You will now see a screen where you can change settings of your investment account.
  4. Go to ‘Do you want to participate in DRIP: Yes / No’ and make your selection.
  5. Open the agreement and check it. Here you will see an overview of features which will apply to your investment account from now on.

Business accounts

If you have a business account, make your choice for DRIP known to your adviser or one of our employees. Contact us on 0900 9215 (usual call charges). From outside the Netherlands please call +31 10 240 70 04. We are available on Monday to Friday from 8 a.m. to 9 p.m. and on Saturday from 9 a.m. to 5.30 p.m. We would be happy to help you.

Investment funds DRIP

Some providers offer you a reinvestment, called DRIP, for their investment funds listed at the Dutch exchange (Euronext Fund Services). With an investment funds DRIP, your general choice for DRIP does not apply. Your general choice for dividend will apply. If you have chosen for dividend pay-out in stocks, then the investment funds DRIP works as follows: 

  • You will receive the net dividend amount (gross dividend amount minus dividend tax) to your payment account; 
  • The provider buys the investment fund’s shares at Euronext Fund Services, at the day price on the pay date. The day price is also called the Net Asset Value (NAV); 
  • The provider delivers the stocks to ABN AMRO at payment of the NAV; 
  • ABN AMRO credits your designated shares to your investment account; 
  • ABN AMRO will debit the purchase price from your current account. With an investment funds DRIP, no costs are charged; 
  • You will receive a separate optional dividend conversion receipt. 

By investment funds DRIP, we only mean the investment funds listed at the Dutch exchange (Euronext Fund Services). So, not the investment funds in which you invest via ABN AMRO’s investor giro. In that case, your general choice for reinvesting will apply. You can read more about this in article 3.2 (What does the bank do with payments that I receive on my investments on the investor giro?) of the Investor Giro Conditions.