How does a Dividend Reinvestment Plan (DRIP) work in Malaysia

What is a Dividend Reinvestment Plan (DRIP / DRP)?

A dividend reinvestment plan abbreviated as DRIP or sometimes DRP is a plan offered by a corporation which allows shareholders to reinvest their cash dividends into additional company shares. Usually, shareholders receive cash dividends as a form of reward for owning stock in a corporation. However, with a DRIP, in lieu of those cash dividends, shareholders can instead opt to purchase and acquire additional stock in the company.

In most cases, a dividend reinvestment plan allows investors to purchase shares commission-free and at a significant discount to the current share price.

Advantages of a Dividend Reinvestment Plan

1. Commission-free

As mentioned earlier, one of the biggest reasons shareholders opt for a DRIP is because you don’t have to pay your brokerage or commission fees.

2. Discount

More often than not with a DRIP, the shares offered will be at a discount compared to the current share price. Between zero commissions and the discount given, the cost to acquire shares through a DRIP is significantly lower than if the shares were purchased on the open market.

Dividend Reinvestment Plans in Malaysia

In Malaysia, not many companies currently offer DRIPs. I still fail to comprehend the reason for this but it may be because most companies are just unwilling to spend the money to have such an exercise annually. There are many advantages to a dividend paying corporation who offer DRIPs. First, shares purchased through DRIPs indirectly free up more capital for the corporation to use. Secondly, I believe shareholders who actually acquire shares through a DRIP are more resilient and loyal as they can more easily recognize and appreciate dividends in their long term growth investment.

Another issue I have with the DRIPs offered by Malaysian corporations is that we as shareholders don’t have the option to automate the process. We have to do fill up the form and mail it every single year if we wish to participate. There should be an option for us to automatically reinvest our dividends.

Maybank’s Dividend Reinvestment Plan

In my portfolio, only two companies have DRIPs – Maybank and Axis REIT. I received Maybank’s dividend reinvestment form (DRF) through the mail on the morning of 10 October 2016. Previously, I’ve read online that Maybank is offering shares purchased through their DRIP at RM7.25.

For those of you who are unfamiliar with Dividend Reinvestment Plans in Malaysia, there are a few things you take note of:

  1. The due date to return the DRF;
  2. Every DRF requires a RM10 revenue stamp (setem hasil) which can be purchased at your local post office;
  3. Jotting down the amount of shares you intend to purchase; and
  4. Your signature.

However, reading through the DRF, I noticed that the due date to return the form to them is on the 13th of October. Being a Monday, the post office was packed and I had to wait for close to an hour to purchase my revenue stamp and post the DRF. Below is a picture of the DRF.

Dividend Reinvestment Plan (DRIP) Malaysia
Maybank’s DRF
Maybank DRP Setem Hasil
Malaysia’s Revenue Stamp / Setem Hasil
Dividend Reinvestment Plan (DRP) Malaysia
80 cents stamp to deliver the mail

As of today, Maybank’s shares are at RM7.66, which means the shares acquired through the DRIP is at a 5% discount.

Have you participated in any Dividend Reinvestment Plans? Also, do any of you know of companies in Malaysia that offer an automatic DRIP?

As always, thank you for reading.

14 Replies to “How does a Dividend Reinvestment Plan (DRIP) work in Malaysia”

  1. Hi Divvy, just a quick question – for the revenue stamp of RM10 to be affixed on the DRF form, does it have to be stamped by IRB or just buy the stamp from the post office and stick it there? Thanks in advance!

    1. Hey Zhi Hoe,

      You can just get it at the post office and send your form after. No need to get it stamped. It’ll be too much of a hassle if it has to be.

      Hope this helped!

  2. Is Maybank Reinvestment dividend plan really worth it? or rather just take Cash and wait for any opportunities to reinvest again? Please advise, thanks.

    1. Hey Chris,

      From my experience, unless your holdings of Maybank is really large, it isn’t worth your time as well as the stamp duty to do it. When I mean large maybe more than RM50K or even RM100K in value then yea it’ll be worth your time.

  3. Thanks for clearing this up for me. Every thing I read about investment is ‘compouding interest’ but the problem is with a small cap, you get small dividend, which without reinvestment like UT, it is impossible to compound to anything significant.

    1. Hey John,

      You’re absolutely right. Small caps are normally growth stocks and most don’t even give out a dividend. UT’s do provide some form of reinvestment but why pay crazy fees for someone to invest for you. I’m touching on UTs a little on my next post. I hope to show everyone how even a 1% fee will affect your investment.

      Thanks for reading!

    1. Hi Patrick,

      Yes bro I’m seriously considering that. I figure I could buy like 10 of each stamps and just head to the post office and drop my DRF off. Hassle free!

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