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What are the different types of dividends?

The most common types of dividends are:

  • Cash dividend
  • Choice dividend
  • Stock dividend
  • DRIP (Dividend Reinvestment Plan)

What is a cash dividend?

A cash dividend is a dividend which is paid out entirely in cash. Dividends distributed by a Belgian company are subject to the Belgian withholding tax of 30%.

With regard to dividends of a foreign company, both the foreign withholding tax and the Belgian withholding tax will be applied if you are a Belgian resident. For more information on foreign withholding tax, please read the following section of this FAQ: How will I be taxed when receiving a foreign dividend?

What is a choice dividend?

A choice dividend gives the shareholder the opportunity to chose between a payment in cash or in stocks. On the ex dividend date of a choice dividend, you’ll receive dividend rights on your trading account. These dividend rights will appear in the section ‘Other markets’ of your trading account. If you do not indicate a preference, dividends will by default be paid out in cash by Keytrade Bank.

  • If you prefer to receive a choice dividend in cash, you do not have to do anything. It will be paid in cash by default.
  • If you prefer to receive choice dividends in stocks, you can communicate your choice through our website. There is a tool available on our platform which allows you to tell us that you allways want to receive a choice dividend in stocks (whenever such a choice dividend is offered).

Despite your choice of receiving choice dividend in stock, it may occur that choice dividend are paid in cash nonetheless. This is due to the “conversion multiple”: a certain amount of dividend rights is required to be entitled to one whole new stock. If you are not holding enough dividend rights to be entitled to a whole new stock, the choice dividend can be paid out in cash, despite your preference to receive choice dividend in stocks. A choice dividend is rarely offered by Belgian companies. It is more common in the Netherlands. As a Belgian resident, you only need to pay the Belgian withholding tax if you choose to receive the choice dividend of a Dutch company in stock. Attention: As a Belgian resident who choses to receive the choice dividend of such a Dutch company in stocks, you will notice that the Belgian withholding tax of 30% will be deducted of the cash balance of your trading account. The choice dividend (if one choses the choice dividend in stocks) will be invested completely in stocks. Consequently, you will need to provide sufficient cash on your trading account. If you fail to provide a sufficient funds, your trading account will show a negative balance, which will involve debit interest on your trading account. If you prefer the choice dividend in cash, then you will be subdued to the foreign withholding tax and the Belgian withholding tax as a Belgian resident. The dividend booked on your trading account will be a net dividend. All withholding taxes will automatically be withheld by Keytrade Bank.

What is a stock dividend?

A stock dividend is a dividend that is automatically paid out in stocks. Shareholders don'’t have the possibility to opt for a payment in cash. In case of a stock dividend, on or after the ex-dividend date, dividend rights will be booked on your trading account. You fill find these dividend rights in the section “other markets” of your trading account. Belgian companies will never or very rarely opt for a stock dividend. This procedure is mostly used by Dutch companies. One of the characteristics of a stock dividend is the creation of new shares. As a Belgian resident, you will only have to pay the Belgian withholding tax with regard to companies listed in Euronext. Attention: Please take into account that as a Belgian resident, you will subdued to the Belgian withholding tax. The (gross) dividend itself will be paid out totaly in stocks. The Belgian withholding tax of 30% will be deducted automatically of your trading account. Consequently, you will need to provide sufficient cash on your trading account. If you fail to provide a sufficient funds, your trading account will show a negative balance, which will involve debit interest on your trading account. Some US companies offer a stock dividend as well. In this case, the shareholder is often subdued to the foreign withholding tax and the Belgian withholding tax. Both taxes will be deducted of your trading account. A stock dividend is a dividend that is automatically paid out in stocks. Shareholders don'’t have the possibility to opt for a payment in cash. In case of a stock dividend, on or after the ex-dividend date, dividend rights will be booked on your trading account. You fill find these dividend rights in the section “other markets” of your trading account. Belgian companies will never or very rarely opt for a stock dividend. This procedure is mostly used by Dutch companies. One of the characteristics of a stock dividend is the creation of new shares. As a Belgian resident, you will only have to pay the Belgian withholding tax with regard to companies listed in Euronext. Attention: Please take into account that as a Belgian resident, you will subdued to the Belgian withholding tax. The (gross) dividend itself will be paid out totaly in stocks. The Belgian withholding tax of 30% will be deducted automatically of your trading account. Consequently, you will need to provide sufficient cash on your trading account. If you fail to provide a sufficient funds, your trading account will show a negative balance, which will involve debit interest on your trading account. Some US companies offer a stock dividend as well. In this case, the shareholder is often subdued to the foreign withholding tax and the Belgian withholding tax. Both taxes will be deducted of your trading account.

What is a DRIP?

DRIP is the abbreviation of Dividend Reinvestment Plan. A DRIP-dividend is paid out in cash by default. As a shareholder, one has the opportunity to reinvest the DRIP dividend in stocks. Basically, you will have the choice to opt for a dividend payment in cash or a dividend reinvestment in (existing) shares. A DRIP-dividend is not dilutive as no new shares are created. For the companies that are listed on Euronext, you will receive dividend rights on your trading account on or after the ex-dividend date. You will find these rights in the section "Other Markets" of your trading account. By default, Keytrade Bank will opt for the cash distribution of the DRIP dividend.

  • If you prefer to receive a DRIP dividend in cash, you do not have to do anything. This will be done by default.
  • If you prefer to receive a DRIP dividend in stocks, than you have a tool available on our platform which allows you to tell us that you allways want to receive a DRIP dividend in stock (whenever such a DRIP dividend is offered).

A DRIP dividend is never or very rarely offered by Belgian companies. This procedure is mostly used by Dutch and French companies.

How do I know which type of dividend a company will be paying?

This kind of information is often available in the section "Investor Relations" or the "Investor's corner" of the company's website.

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