I am interested in what happens to dividend payments that are below 1p, for instance, when you have fractional shares? Do ‘fractional dividends’ add up in the background until they are payable or does something else happen to them, such as not being paid out by the stock exchange or squirrelled away by FT?
Any insights much appreciated.
Funnelled away by Gus, who then gets hired to design a computer to beat Superman.
Hahahaa. I bloody knew it!
Will he turn up at freetrade towers in a Ferrari 308 ?
Just a US army jeep, whilst dressed as a General.
He’ll give some green rock thing to people
If your dividend doesn’t accumulate 1p you get nothing.
Thanks. Does that mean that FT gets it? Presumably FT get paid the dividends as they own the whole shares, pay the whole pence to those eligible and then keep the fractions? Maybe that is part of the fractional shares business model.
This is a very good question actually. I would have hoped that below 1p would mean it accumulates for next time (I have had shares pay out slightly different penny amounts from month to month) but the way you theorise may actually be the correct answer.
I would guess they round to the nearest 1p, meaning there are winners and losers.
I don’t know though.
Yes someone else gets your fractions of a pence.
Not sure on that one. I posted something similar some time ago, and the consensus seemed to be that FT always rounded down, suggesting that they keep the fractions. I know that Halifax used to round to the nearest penny, so could differ between brokers.
Edit: Just checked recent BP dividend and point 7 of a pence rounded down.
To be honest, it isn’t a big concern to lose a fraction of 1p. If it helps Freetrade move towards profitability/long-term financial stability then it helps all of us.
Thanks @fivegoldstars. It interests me both from an investor standpoint and now a FT convertible investment holder. It’s useful to understand the model from both perspectives. I bet all those fractions of pennies add up to some and as the old adage goes, save the fractions of pennies and the pennies look after themselves (or something like that)!
Have you got a source to evidence this ? My understanding is your underlying balance is held at a level of decimal places greater than the two that they show.
I agree. Especially at my age! I was just interested in how it worked. I imagine there are trillions of fractions of pence being collected around the system all adding up to being essential in maintaining the operation of the markets.
I can’t speak for freetrade in and of itself. But I do work in the UK stock market industry and it’s called dividend rounding.
If your dividend is 0.6p and someone else has a dividend of 73.4 p, that parson will get your fractions to make one extra full pence.
What math rules do they use to do the rounding? In my eyes according to what I learned MANY MOONS ago in your example the 0.4p from the person with the dividend would get moved to the 0.6p as they had the higher fraction and they would get 1.0p and the other 73p, Now if it were 73.6p and 0.4p it would be the other way and the distributions would be 74p and 0p.
I always assumed the company keeps the difference. But as they don’t know who we are as in when you got your share certificate in paper and the company knew who each shareholder was (dividends paid by cheque). So now the excess must go to the stock broker. If they round down and give extra to a different shareholders then anything left over is part of penny. I hope they give all those parts of penny to charity. Namely my bank account.