What you need to know about Property Dividends

Most stock investors are now already familiar with the two basic forms of dividends: cash and stock. 

Obviously, cash dividends are distribution of a company’s income to stockholders in the form of cash. When announced, the cash dividend is usually stated in peso or dollar amount (for example, PhP 5.00 cash dividend for every share of X company). To compute for the total amount of dividends the stockholder is entitled to receive, one simply has to multiply the amount of dividend per share by the total number of shares owned by the stockholder.

Stock dividends, meanwhile, are dividends in the form of additional shares of company stocks. The dividends, when announced, is usually in percentage form, such as 10% stock dividends or 25% stock dividends. To get the total number of shares that a stockholder is entitled to receive as stock dividends, simply multiply the number of shares held by the stock dividend percentage.

More useful resources on Dividends

To learn more about dividend income, here are some useful resources on the topic:

About Property Dividends

What most investors do not know, however, is that there is a third, albeit rarely, used form of dividends. This third type is called Property Dividends, which are dividends in the form of other assets, such as tangible products of the company or shares of stocks in a company affiliate or subsidiary.

Companies usually resort to property dividends if they want to distribute dividends to stockholders but do not want to use cash, perhaps because they do not have enough cash on hand, or do not want to dilute the company’s ownership with additional shares of stocks distributed as stock dividends.

Types of Property Dividends

As mentioned earlier, property dividends may be in the form of actual products or inventories of the companies’ goods — such as grocery items in the case of a supermarket, a condo unit in the case of a real estate company, or a car in the case of an automobile manufacturer.

In the Philippines, though, the widely-used choice for property dividends is the second form: that is, shares of stocks in an affiliate or subsidiary of the dividend-paying company.

Stock Dividends vs. Property Dividends

Although stock dividends and property dividends appear similar because they both involve distribution of stocks, if the shares distributed are shares of the company making the dividend payment, it is categorized as stock dividends.

If the shares given to stockholders, meanwhile, are shares not of the company paying the dividends but from its affiliate or subsidiary instead, these are called property dividends.

Examples of Property Dividends in the Philippines

Several local companies in the past have distributed shares of stock of their affiliates or subsidiaries as property dividends.

In April 2007, Vantage Equities Inc. (PSE stock code: V) distributed property dividends in the form of 84.79 million shares of its subsidiary Yehey! Corp (YEHEY), a digital marketing company. The approved property dividends gave Vantage shareholders the right to receive (1) YEHEY share for every twenty (20) common shares of Vantage held as of record date. Yehey! Corp. ultimately had its public offering through listing by way of introduction in October 2012. (See Yehey IPO in 2012)

In another example, RFM Corp. (RFM) in August 2012 distributed property dividends to its shareholders. For every 77 shares of RFM held as of record date, shareholders got one (1) share of Philtown Properties Inc., a real estate subsidiary of RFM Corp.

Also in April 2012, power distributor Meralco (MER) opted to divest its 51% stake in upscale property developer Rockwell Land Corp. (ROCK) by distributing those shares to Meralco shareholders as property dividends. Stockholders got 2.818 common shares of ROCK for every one (1) share of MER held. Rockwell Land Corp. eventually listed on the Philippine Stock Exchange also by way of introduction in May 2012.

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