Dividend Re-Investment Plan (DRIP) – Take Cash or Shares?

Dividend Re-Investment Plan (DRIP) allows existing shareholders of the stock to choose between cash dividends OR reinvestment into additional shares (“bought” from the company) on the dividend payment date. Most DRIPs allow the option of taking additional shares, usually commission-free and at a significant discount to the current share price.

DRIPS of water forming an extensive resource pool

For investors, it also means automatic compounding of returns take place over the long term – when dividends are increased, shareholders receive more as the number of shares had increased. For the company, it creates more capital for the company’s deployment. Secondly, shareholders who opt for shares in a DRIP are less likely to sell their shares when the stock market declines as they recognise the role of their dividends play in their portfolio growth. Less cash distributed for a larger share base.

The big question for some newer investors is – When take cash? When take shares?

So far, my own encounter for DRIP most recently in the past few months are for Oversea-Chinese Banking Corp. Limited (O39) and Far East Hospitality Trust (Q5T).

Oversea-Chinese Banking Corp. Limited (O39)

“Oversea-Chinese Banking Corporation Limited (the Bank) announced today, in its Second Quarter 2019 results announcement, that its Scrip Dividend Scheme (the Scheme) will be applicable to the interim one-tier tax-exempt dividend for the financial year ending 31 December 2019 (the FY19 Interim Dividend) of 25 cents per ordinary share (Share). The Scheme will provide holders of fully-paid ordinary shares in the Bank (Members) with an option to elect to receive new Shares (New Shares) in lieu of the cash amount of the FY19 Interim Dividend. Entitlements to the FY19 Interim Dividend will be based on the Shares held by Members as at 5.00 p.m. on 16 August 2019 (the Books Closure Date).

For the purposes of the application of the Scheme to the FY19 Interim Dividend, the price at which each New Share is to be issued (the Issue Price) will be set at a 10% discount to the average of the daily volume weighted average prices of the Shares during the price determination period between 15 August 2019 and 16 August 2019 (both dates inclusive) (being the period commencing on the date on which the Shares are first traded on an ex-basis and ending on the Books Closure Date). The Bank will announce the Issue Price on 19 August 2019.”

Far East Hospitality Trust (Q5T)

FEO Hospitality Asset Management Pte. Ltd., as manager of Far East Hospitality Real Estate Investment Trust and FEO Hospitality Trust Management Pte. Ltd., as trustee-manager (the “Managers”) of Far East Hospitality Business Trust wish to announce that further to the announcement dated 30 October 2019 in relation to the application of Far East Hospitality Trust’s (“Far East H-Trust”) distribution reinvestment plan (“DRP”) to the distribution of 1.04 Singapore cents per stapled security of Far East H-Trust (“Stapled Securities”) for the period from 1 July 2019 to 30 September 2019 (the “Distribution”), the issue price of the new Stapled Securities to be issued under the DRP in respect of the Distribution is S$0.7090 per Stapled Security.

The issue price represents a 2% discount to the volume-weighted average trading price per Stapled Security for all trades on Singapore Exchange Securities Trading Limited (the “SGX-ST”) for each of the Market Days during the period of 10 Market Days immediately prior to, and ending on, the books closure date on 7 November 2019 (the “Books Closure Date”). The number of Stapled Securities to be allotted and issued to stapled securityholders of Far East H-Trust (“Stapled Securityholders”) pursuant to the DRP shall be rounded down to the nearest whole Stapled Security with the fractional entitlements disregarded, or otherwise dealt with in such manner as the Managers may deem fit.

What did I choose for both of the above?

I chose scrip dividends for both.

For 25 cents per ordinary share, my cash dividends should have been $125 for 500 shares. With DRIP, I had as scrip dividends 14 shares at $10.62 or $148.69 in equivalent cash. The good news is, fractional entitlements to a Share will be rounded up to the nearest whole Share for OCBC. We could see that taking shares was better than cash dividends.

For 1.04 cents per stapled security, my cash dividends should have been $54.56. With DRIP, I had as scrip dividends 72 shares at $0.69 or $49.68 in equivalent cash. The bad news is, fractional entitlements are disregarded and rounded down to the nearest whole Stapled Security for FEHT. We could see that taking cash dividends was just a bit on top of taking shares. However, we also had to note that this addition of shares was carried out commission-free.


There is no absolute advantage or disadvantage in taking cash dividends or shares to shareholders. It is more of a question of choice. Some investors swear off scrip for odd lots or for pure dividend play. If you have better deployment of the cash dividends, you may opt for cash. As for me, I prefer to build up my positions in fundamentally strong companies for the long run.

Do you generally take cash or shares from a DRIP?


How much is your one Bullet?

Anyone who has been in the market for some time would have experienced and incurred some accumulation of market trading fees and commissions. What we realise is that, these can add up to quite a bit after some time, especially if the frequency of trading (buy & sell) is higher or if the value of the contract is lower.

What we do want is to optimise our investment dollars and spend as little as possible in fees on each trade carried out.

Market Fees

Market trading fees

Some fees are imposed and is regardless of the value of contract traded. One example are markets fees, which is dependent on the market you trade in. It is neither a recommendation nor advice to avoid markets that charge and lean towards markets that do not or charge a lower fees. Investors should pick the markets based on their understanding of the market, comfort level and also available market opportunities.

The bad news is you cannot avoid market fees. The good news is market fees are usually a fixed percentage on the value of your contract regardless of the size of trade.

Brokerages trading commissions

Brokerage and Custodian commissions for trading in the Singapore Market

The other unavoidable cost is brokerages trading commission. With 13 brokerages or custodians to date, the commissions charged differs depending on size of trade and holdings type. As a rule of thumb, investors normally try to keep the level of commissions to a minimum. In other words, to trade at a minimum amount as close to at least the minimum fees incurred.

For example, UOB Kay Hian trading commission is 0.28% of the value of your contract, subject to a minimum $25 fees whichever is higher. The optimum contract value for each trade is $8930. An investor who buys $5000 worth of stocks in a single contract will still incur $25 fees (which is the equivalent of 0.5%). Another investor who sells $2000 in a single contract will also incur $25 fees (which is the equivalent of 1.25%.

What can we understand from this? The lower the contract value, the higher (percentage) of trading fees occurred. Refer to the column ( < $50K) for the optimum minimum contract value for each of the brokerages.

Optimum trade size or lower threshold for minimum commissions

Do I save up to the optimum minimum contract value before I fire one bullet? Or is there a lower acceptable threshold? My personal take – do not incur beyond 0.8% in fees on your overall contract value.

Investor AInvestor B
Overall lifetime trade of $100,000 Overall lifetime trade of $100,000
Trades $5000 at a timeTrades $2000 at a time
Incurs $500 commissions fees Incurs $1250 commissions fees
0.5% as fees1.25% as fees

We can see from the above table that Investor A incurs a lower percentage of commission fees by trading a larger contract value each time even though the overall lifetime trade is the same.


What small-time investors could do is to “save up” for a trade. In other words, instead of trading monthly, you could opt for quarterly or even semi-annually. Otherwise, you could partake in the Regular Savings Plans (RSP) offered by

  • DBS Invest-Saver
  • OCBC Blue Chip Investment Plan
  • POEMS Share Builders Plan

This program allows you to invest from $100 upwards monthly and at the same time keep commission fees relatively lower.

So, how much is your one bullet?

How BIG should your War Chest be?

A common question newer investors wonder as they start to get their hands dirty: How big of a War Chest should I build before I enter the market?

The War Chest of a company in the corporate world is no different from the individual investors’.

For a company, it could either refer to the cash reserves set aside to take advantage of unexpected opportunity (e.g. acquisitions of other companies or businesses) or crisis (e.g. buffer against adverse events).

Be Greedy when everyone else is Fearful and be Fearful when everyone is Greedy

For a investor, it largely refers to cash reserves built up for opportune use in a bear market or crash. During such times, prices get lower and investment instruments become undervalued. In other words, investors who pounced during these times not only lower their average cost of acquisitions, but also pose themselves for maximum gain during market boom. In other words, the employment of Maximum Pessimism strategy.

A bigger War Chest does not necessarily mean a better War Chest

Sure, a bigger War Chest means more firepower. Though, one that has swelled up too much could also be inefficient capital deployment.

A company, which is unable to deploy its excess cash balances beyond its normal operating requirement efficiently for a long period of time, may consider partial distribution of its cash holdings via special dividend distribution, a share buyback, an increase in regular dividend or even a combination of the above back to shareholders.

The same goes for an investor. Some continue to hoard cash in expectation of a market crash. Having a large cash reserve is not bad. However, a balance has to be made between efficient deployment and anticipatory deployment. A cash hoarder is missing out on potential capital appreciation and dividend gains over the same period of time. For the average investor, time in the market beats timing the market hands down.

Common mistake of a cash hoarder

A War Chest, contrary to what many think, need not be fully in cash. All it matters is for its monetary value to be easily accessed on demand. It is not uncommon however for a War Chest to be entirely in cash. What this means is that cash sitting in the bank savings account is earning a petty interest, waiting for “the day to be deployed”.

Remember, a War Chest just has to be easily accessed on demand. However, this does not mean that your money should stop working for you. A consideration is to invest in short-term liquid investments or liquid cash equivalents such as Fixed Deposits (FDs – 1 to 36 months), Singapore Savings Bonds (SSB – 1 to 10 years), Treasury Bills (T-Bills – 6 months, 12 months). It is also advisable to portion the War Chest into a few rather than lump sum, such that you need only liquidate the required amount when the need for it arises.


It is not a matter of how big your War Chest, but how efficient do you deploy your War Chest.

How well do you manage your War Chest?

Update on CPF 101 guide – Investment Scheme

As of today, I have updated the CPF 101 guide to include the INVESTMENT scheme. Hopefully, I have covered all that a regular investor who invest his CPF-OA and CPF-SA needs to know.

Last week, I have started putting together a CPF 101 guide, besides the hack guide which I consolidated previously, in an attempt to consolidate all the CPF schemes. Only the RETIREMENT scheme was covered then. The 101 guide still aims to keep it simple and logical, illustrating all the basic principles and concepts.

If it aren’t Simple, people aren’t Reading it.

It’s NOT complete as it has not include the other schemes that the CPF money could be used for.

Give it a share if you find a guide useful, as it serves like a “textbook” rather than flipping through Q&As pages or hunting for answers throughout the web.

Do let me know if there errors or feedback to the CPF 101 guide. It shall constantly be approved over time for clarity and accuracy.

Living on $2 a day food challenge

It was by chance that I stumbled upon this after I embarked on my $2 a day savings challenge. The REAL Two Dollar Challenge is actually a food challenge packaged as a “personal journey that will confront and challenge the person who takes it up with a few of the many constraints faced by those who live on less that $2 a day”. There are three different levels of participation: Beginner, Intermediate, and Advanced.

Japanese woman retires at 34 after living on $2 a day for 16 years

Who would have forgotten the story of a Japanese woman who spent no more than 153 yen ($2) a day for the past 16 years and saved enough to acquire three houses costing a total of 55 million yen ($716,974) in under two decades? She is currently retired before 35, living on a monthly rent income of 300,000 yen ($3,911).  

Basic Standard of Living by Singaporeans

A “basic standard of living” refers to access to education, employment and work-life balance, and healthcare. A team of researchers from the local public universities made the following discovery after some local focus-group discussions conducted from a 100+ size sample, covering various ethnic groups, housing types and educational levels. 9 in 10 (89 per cent) were aged > 55.

A Singaporean senior citizen aged > 65 living alone needs about $1,379 a month. Those aged between 55 and 64 needed $1,721. Couples aged > 65 needed $2,351.

The Department of Statistics published a 2016 newsletter that found out that an average monthly expenditure of $3,590 was incurred by households with a senior citizen aged > 60 . The average household size was 2.9 in the same year, which meant that each household member was spending on average $1,240 monthly.

Low Income earners in Singapore

Low income earners are a reality. With the 20th percentile in 2018 earning $2340 (including Employer CPF contribution), one can only imagine how low people below 20th percentile earns. No food at the end of the month is also a harsh reality for some low income families.

The Two Dollar Challenge

So the Two Dollar Challenge is an experiment whose main goals are not just to appreciate the value of money, but to experience first hand and raise awareness on the constraints of the many who could only live by $2 a day. There were similar experiments in the past, including one which was a school project turned Singapore Poverty Awareness Campaign.

How did I fare for a day?

Firstly, the only drink I “could afford” was water all day long. I was lucky that the office water cooler had both hot and iced water. A single banana ($0.20) was my breakfast for the day. Lunch was a single 7Days Crossiant with filling ($0.80). Naan with curry ($1.00) Tekka Food Centre make up my dinner.

The challenge was done. But it was pretty stressful for a day. You are constantly budgeting and evaluating each choice. Do note however, that the above had not included transportation cost. The Two Dollar challenge also raised a good point: “You just cannot afford to fall sick.”

There is another lifestyle called Freeganism (limited participation in the conventional economy and minimal consumption of resources, particularly through recovering wasted goods like food), but we will come to that another time.

Learning Points

  • Anyone can save crazily – it is a matter of putting your heart and mind to cutting down expenses.
  • A minimum sum of money is required for your Basic Standard of Living. It defers from one individual to another. Work out your own.
  • Good health is imperative. Even a bout of sickness could eat into your savings.

Would you like to try taking up this $2 food challenge, even for a day?