I`m having some of my investments in Prospect capital PSEC. On there site they write: Dividend Reinvestment Plan We encourage any shareholder interested in participating in our dividend reinvestment plan (also known as a “DRIP” or “DRP”) to contact his or her broker to make sure such DRIP participation election has been made for the benefit of such shareholder. In making such DRIP election, be sure to specify to your broker the desire to participate in the “Prospect Capital Corporation DRIP plan through DTC” that issues shares based on 95% of the market price (a 5% discount to the market price), and not the broker’s own "synthetic DRIP” plan with 0% discount. https://www.prospectstreet.com/investors/dividend-reinvestment-plan/default.aspx
Guys if i do auto-invest on a pie will it use that 5% discount? Do I need to do something special for Trading 212 to start using that discount? Is it possible to use that discount at all?
@Zergui is right here - we currently don’t offer such discounts, even if you enable the DRIP function for your PSEC holdings through our Pie feature.
Still, if anything changes in the future, we’ll make sure to let everyone know right away
Thanks for the replies.
Sad to hear its not possible, 5% discount is on my opinion incredible with hidden bonus of skipping taxation on dividend and FX effect.
Well I guess PSEC is not the only that offers there own individual DRIP function, so pls look for implementing them in the future. That would definitely make some stocks way more attractive then they are now.
Acc ETFs work in similar way, don’t they?
OK, so that laves only the FX effect as hidden bonus.
I am considering Acc ETF and I believed they actually “pay” dividends by distributing more shares of the ETF, but I red on the forum on some other of your posts that they actually don’t distribute anything and instead reinvest so that should increase the overall value of the ETF.
So what is really happening with dividends from Acc ETFs?
Accumulating fund, as the name suggests, retain the dividends distributed within by the underlying companies, and reinvest those.
Then you receive neither cash compensation, nor new units of the fund; but the NAV (Net Asset Value) of your shares has increased; so compared to that same fund Distributing, the share price of the Accumulating fund rises more.
A Distributing fund on the other hand will issue a few times a year (usually 2 or 4) a distribution, which they do to pay out underlying dividends received in the meantime. By comparison, the share price of the fund won’t rise as much, as the dividends are not reinvested within the fund.
To be of note: both methods return the exact same total returns, one in the form of cash flow and capital appreciation, the other only via capital appreciation.
Usually, you will not be taxed on the distributions received from an ETF (careful, your mileage may vary here!)
But regardless of Accumulating of Distributing fund, you will be liable for every dividend taxes due to the dividends received from the underlying companies, just as if you held the companies yourself.
The funds providers will issue a yearly document summarizing these in order to file your taxes.
