Monday, September 15, 2014

How Does SCB Handle Foreign Currency Dividends?

I never bought equities with any other broker other than Standard Chartered, so I don't know how the CDP account works actually. However, I would like to share my experience using SCB as my equity broker.

Until now, I have received dividends from 2 of the counters that I own. They are Lippo Malls and Singapore Shipping Corp.

For both counters, the dividend amount was directly credited into my trading account the next trading day after the pay date.

For example:
Singapore Shipping Corp: Pay date was 18 Aug, SCB credited my account on 19 Aug
Lippo Malls Retail Trust: Pay date was 29 Aug, SCB credited my account on 1 Sep

One of the things that I have always been curious about is, what if the dividends declared was not in SGD?

I did call up SCB about to ask about this before. I don't think the guy was very sure what he was talking about. Anyway, he said that dividends will be credited to your trading account if you have another one in the foreign currency (FCY). If you don't, then it will be credited to a normal FCY bank account if you have one. If you don't have one, you will get a cheque for the FCY amount from SCB through the mail, which SCB can glady encash for you, with a standard FX charge.

I can now confirm that this is not true!

Another counter of mine that went XD has reached pay date, and the dividends declared was in USD. The counter that I am talking about is CDW Holdings, which was one of my first few purchases (brief rationale for purchase).

Pay date was 12 Sep and dividends declared was 0.005 USD per share. This translate to $5 USD for each 1000 share lot.

When I checked my account today, I was surprised to find it credited with $6.26 SGD! (Yes, I only bought 1 lot because I wanted to test the treatment of foreign dividends first!)

Apparently SCB will credit the FCY dividends into your SGD trading account after applying a minimal FX charge. By my calculation, the currency conversion took a 1% bite out of the dividends I was to receive.

1% charge for a hassle free way of handling your FX dividends is a good price that I am willing to pay! This means that I don't need to go down to the bank to try and cash in a $5 USD cheque.

Personally, I am extremely pleased with the online equity trading services provided by SCB. Their platform might not be the prettiest, but it is simple and does what you need it to do. With the small amount of money that I have put in, I have built up a pretty simple and diverisifed portfolio of defensive value stocks. If I had done the same number of transactions on any other platform, the minimum commission charge would kill me.

I think that SCB is the perfect broker for investors that are starting out because of the zero minimum commission. Add in the fact that they are no-frills and handle your dividends very well, I give them bonus points for that. And finally, when shares drop too 100 per lot next year, I wonder which platform will be the ONLY platform worth going to? I foresee capitulation among all the brokers to come up with a brokerage model like SCB.

On a side note, CDW is trading conservatively 20% below it's NAV. Cash they have on hand is a huge ass amount of 87% of net assets. I have to say this counter is still quite attractive! However, looks like broad market weakness will pull all the boats down in the near future. I shall be waiting to see how things go.

2 comments:

  1. For CDP, if you have signed up for the DCS (direct crediting service), then the dividends are credited directly into your bank account, by the next business day for the dividends when it is pay out. If DCS is not present, then a cheque is sent to you based on your mailing address.

    For foreign currency dividends, they will also auto credit for DCS based on that business day foreign exchange rates. For non DCS, the cheque will reflect the foreign currency dollars, and sent to your mailing address.

    Just for comparison, SCB forex was 1.252, and CDP was 1.2530000. They are comparable.

    ReplyDelete
  2. Hey Numbers!

    Thanks for the all info about CDP and dividends. I guess it is pretty much the same thing as SCB then!

    ReplyDelete

Observe the house rules.