Originally Posted by
quartzpurple
Guys,
Companies who initiate dividend reinvestment are likely to be strained in their cash position. It is just a sugar-coated way of not cutting your dividend outright.
They pay you the dividend but take it back with this scheme called "dividend reinvestment". If you refer to the cash flow statement, cash flow after paying dividend is almost zero.
If something happens to the operation, it is very likely they would have to borrow more to keep them a float because cutting dividend sends a very negative signal.
I think it is a waste of company resources. I think the post office, Computershare, and the financial institutions who handle all these transactions have more to gain than the common shareholders!