Ibex companies are preparing to distribute 5.7 billion euros in dividends to shareholders this fall. Telefónica will pay the highest dividend, as usual. Santander and Enagás will follow.
But not all shareholders will be smiling. Some of the companies on the Spanish stock market will end up paying shareholders in script dividend. This strategy has been used heavily during recent years by companies that are strapped for cash and want to safeguard their limited resources. Issuing scrip dividend does not dilute shareholder stock, but does not offer an immediate cash source either.
With strong limitations imposed on it by the Bank of Spain, the banking sector will continue to rely heavily on issuing new company stock in lieu of cash dividends. Investors should be ready to choose what will be the most profitable option for them to choose.
