Accounting and Finance: Many companies on the Bursa Malaysia encourage shareholders to participate in the Dividend...

Accounting and Finance:

Many companies on the Bursa Malaysia encourage shareholders to participate in the Dividend Reinvestment Plan. The plan should be exercised with caution.

Explain the consequences of a badly executed Dividend Reinvestment Plan especially in this post Covid-19 economic scenario with example.

Solutions

Expert Solution

After studying your question, I would like to give my opinion in a simple and brief manner. Following are my observations related to Dividend reinvestment plan (DRP)

Dividend reinvestment plan or program allow the company shareholders to invest their dividend earned into their respective company shares at a discounted price which normal investors cannot avail
Also shares purchased through Dividend Reinvestment plan cannot be marketable directly on stock exchanges so it should be redeemed through company
Dividend Reinvestment plan is a best option for shareholders who want to invest into shares of a company for long time growth even though there are fluctuations in share price

Effect of a bad decision on Dividend reinvestment plan: In case you wrongly exercise this option .i.e. you exercised this option for a not well performing company in their respective industry you may lose your share value and your expectation on long-term growth will be seriously effected

Conclusion: After taking into above analysis it is completely based on shares of a particular company which "THE INVESTOR" is willing to invest .Even in case of a "PADEMIC SITUATION LIKE COVID 19" we have to follow the same principle. Execution of such decisions should be done in a careful manner otherwise simply opt for "NORMAL DIVIDEND PAYMENTS"

DISCLAIMER: This is only my personal opinion on your question solely for educational purpose not for any INVESTMENT OR TRADING objective in real practicing world. In case of such situations, you have to take opinion from industry experts

jeff jeffy answered 2 years ago

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