Scrip Dividend Scheme Singapore: When a Company Pays You in Shares Instead of Cash
Last updated: September 2026
A scrip dividend scheme lets shareholders elect to receive their dividend entirely or partly in new shares of the company instead of cash, at a price usually set at a small discount to the prevailing market price, and is commonly used by SGX-listed companies and S-REITs to conserve cash while still rewarding shareholders.
Not financial advice. All figures for educational reference only. Data as at September 2026.
Key Takeaways
- Under a scrip dividend scheme, eligible shareholders choose between cash, shares, or sometimes a combination, with the share alternative priced using a formula tied to a recent volume-weighted average price, often at a small discount.
- S-REITs have historically used scrip dividend schemes during periods of elevated capital needs or market stress, since issuing new units in lieu of cash distributions preserves cash for debt reduction or acquisitions.
- Opting for scrip typically results in fractional entitlements being rounded down, with the residual cash value of the fraction paid out separately or carried forward, depending on the scheme’s rules.
- Taking the scrip option increases your total unit or share count and therefore dilutes existing shareholders proportionally, since the company is issuing new shares rather than distributing existing cash.
- Tax treatment of scrip dividends in Singapore generally follows the same principles as cash dividends for the underlying distribution, though the specific tax character can depend on whether the issuer is a company or a REIT and the nature of the distribution.
What Is a Scrip Dividend Scheme?
How Does It Work in Singapore?
Example
Advantages
Risks and Limitations
Scrip Dividend vs Cash Dividend vs Dividend Reinvestment Plan
The Bottom Line
Frequently Asked Questions
What Is a Scrip Dividend Scheme?
A scrip dividend scheme is a mechanism that gives shareholders or unitholders the option to receive their declared dividend or distribution in the form of new shares (or REIT units) instead of cash. The company or REIT manager sets a reference price for the new shares — typically based on a volume-weighted average trading price over a specified period leading up to the scheme’s books-closure or election date — often with a modest discount applied to encourage take-up. Shareholders who opt in receive additional shares proportional to their entitlement’s cash value divided by that reference price, while shareholders who don’t elect (or who actively opt for cash) continue to receive their dividend as normal cash payment.
Scrip dividend schemes are distinct from a Dividend Reinvestment Plan (DRP) in some markets, though the two concepts are closely related and sometimes used interchangeably in casual conversation. In Singapore, the mechanism is particularly associated with S-REITs, several of which have implemented scrip dividend schemes at various points, especially during periods where preserving cash on the balance sheet — for deleveraging, funding acquisitions, or navigating a higher interest rate environment — was a strategic priority for the REIT manager.
From the issuer’s perspective, a scrip dividend scheme is a capital management tool: by issuing new shares in lieu of cash to shareholders who elect it, the company or REIT retains that cash internally rather than paying it out, effectively functioning as a targeted, opt-in capital raise layered on top of the regular dividend distribution process.
How Does a Scrip Dividend Scheme Work in Singapore?
When a company or REIT manager announces a scrip dividend scheme alongside a declared dividend or distribution, shareholders as of the relevant record date receive an election form or notice (typically via their broker or CDP, depending on how their shares are held) specifying the deadline to elect for scrip, along with the pricing formula that will determine how many new shares each shareholder receives if they opt in. The reference price is usually calculated using an average of the closing prices over a defined number of trading days immediately preceding the price-fixing date, sometimes with a small percentage discount applied as an added incentive for shareholders to choose scrip over cash.
Shareholders who take no action are typically defaulted to receiving cash, since scrip participation is opt-in rather than opt-out on most SGX schemes — though the exact default varies and should always be checked against the specific scheme’s terms. Those who elect scrip receive new shares credited to their CDP or custodian account around the payment date, calculated by dividing their cash dividend entitlement by the reference price; any resulting fractional share entitlement is typically rounded down, with the fractional cash value either paid out in cash or, less commonly, carried forward.
For S-REITs specifically, scrip dividend schemes have periodically featured as part of broader capital management strategies during periods of rising interest rates or elevated acquisition activity, since retaining distributable cash by issuing units instead helps manage gearing and reduce reliance on more expensive debt or equity fundraising. Investors evaluating a REIT with an active or recently-used scrip scheme should look at take-up rates (the percentage of unitholders who actually elect scrip) as a signal of how the market is interpreting the REIT’s capital position, alongside the scheme’s effect on the REIT’s total unit count and, consequently, per-unit metrics like DPU.
Scrip Dividend Example
An S-REIT declares a distribution of 2.5 cents per unit and offers a scrip dividend scheme priced at a 2% discount to the volume-weighted average trading price over the five trading days before the price-fixing date, which works out to a reference price of S$1.47 per new unit. A unitholder with 10,000 units is entitled to S$250 in distributions. If they elect scrip, they receive 170 new units (S$250 ÷ S$1.47 = 170.06, rounded down), with the residual S$0.09 fractional value paid out in cash, bringing their total holding to 10,170 units going forward, while a unitholder who opts for cash simply receives the full S$250 with no change to their unit count.
Advantages of a Scrip Dividend Scheme
- Compounds your holding without needing fresh capital. Electing scrip effectively reinvests your dividend automatically, growing your position without transferring new cash into your brokerage account.
- Discount pricing can offer better value than buying additional shares on the open market at the prevailing price, when a discount is applied to the reference price.
- No brokerage commission is typically charged for shares received via a scrip dividend election, unlike manually reinvesting a cash dividend by placing a new buy order.
- Signals issuer confidence in growth when framed as funding accretive acquisitions rather than as a defensive cash-conservation measure, though this interpretation requires reading the issuer’s stated rationale carefully.
Risks and Limitations
- Dilution for shareholders who don’t elect scrip. New shares issued to scrip electors increase the total share count, which can modestly dilute per-share metrics for all shareholders, not just those who opted in.
- Loss of immediate cash income. Investors relying on dividends for regular cash flow, such as retirees, lose that cash if they elect scrip instead.
- Frequent or large-scale scrip schemes can signal balance sheet stress, particularly for a REIT relying on them repeatedly to avoid raising cash through other means.
- Reference pricing may not always favour the shareholder, particularly if the share price has been volatile around the pricing window, making the effective entry price less predictable than a simple market purchase.
Scrip Dividend vs Cash Dividend vs Dividend Reinvestment Plan
| Feature | Scrip Dividend | Cash Dividend | Dividend Reinvestment Plan (DRP) |
|---|---|---|---|
| What you receive | New shares, opt-in | Cash, default for most schemes | New shares via automatic reinvestment |
| Brokerage fee | Usually none | N/A | Usually none, if offered by issuer |
| Effect on share count | Increases | No change | Increases |
| Cash flow impact | None — no cash received | Immediate cash received | None — no cash received |
| Common issuer type in SG | S-REITs, select companies | Nearly all listed companies | Less common as a standalone SG product; scrip scheme is the typical local equivalent |
Source: MAS, CPF Board, SGX, insurer/bank disclosures, TKN research (September 2026).
The Bottom Line
For Singapore investors, a scrip dividend scheme is a way to compound a holding automatically and sometimes at a small discount, but it comes at the cost of immediate cash income and modest dilution for non-participants — worth evaluating case by case rather than defaulting to scrip purely out of habit.
Frequently Asked Questions
What is a scrip dividend scheme?
It’s a scheme that lets shareholders elect to receive their dividend in new shares instead of cash, usually priced at a small discount to the recent average market price.
Do I automatically get shares instead of cash under a scrip dividend scheme?
No, participation is typically opt-in — shareholders who take no action usually continue to receive cash as the default.
Why do S-REITs use scrip dividend schemes?
Primarily to conserve cash for debt reduction, acquisitions, or navigating higher interest rate periods, by issuing new units to shareholders who elect scrip instead of paying out cash.
Does electing scrip dilute other shareholders?
Yes, modestly — because new shares are issued to those who elect scrip, the total share count increases, which can affect per-share metrics for all shareholders.
What happens to fractional shares under a scrip dividend scheme?
Fractional entitlements are typically rounded down, with the residual cash value paid out separately, though the exact treatment depends on the specific scheme’s terms.
Can I choose to receive part cash and part scrip?
It depends on the specific scheme’s design — some schemes only offer a full cash or full scrip election, while others allow a partial split; the terms are disclosed in the scheme documentation.
Does taking scrip affect how my dividend is taxed?
The underlying distribution generally retains its tax character whether received as cash or scrip, though the specific tax treatment can vary depending on the issuer type and should be checked against current IRAS guidance.