TM- Advantages of Dividend Reinvestment Scheme (DRS)

I have been with TM for a long time. A fairly long time. I have gone through the company from the time it still had the international component that is now AXIATA. I like it because it is a defensive stock which has been giving generous dividends of about 22%. It's capital repayment exercises, every two to three years also allow the investors to lock up gains and reinvest at a lower stock price. I must say TM has been creating wealth for me all these years.

For the financial year of 2013, I received the first dividends of 9.8 % and the second declared value is 16.3% which in all constitutes 26.1%, slightly higher than that in FY2012, at 22%.

Four days ago I received a message on my phone that the new policy of the company is to give an option for all eligible shareholders to reinvest the dividend units, an entire electable portion or part of it. I have yet to get the DRS form from the share registrar, Tricor.

 I have no problem about this policy because most of the time I have not used the dividends but instead invest it into another unit trust. I have noted TM's EGM resolutions which have all been approved recently and downloaded the TM DRS proposal . 

I have also looked at the Maybank write-up on their dividend reinvestment plan or DRP which is similar to  dividend reinvestment scheme or DRS by TM and have some ideas on how this policy operates. Maybank is among the first to implement DRS or DRP in Malaysia and have prepared an excellent FAQs.

From my understanding, following each dividend declaration, you will be asked whether to reinvest 100% of the electable portion of the dividend or part of it or you would rather accept cash. So your decision is based on a particular dividend.

Dividend Reinvestment Scheme (DRS)
is a form of Forced Savings

Why reinvestment of dividends? To me it shows that the company is confident in giving long-term value to its investors. Moreover the reinvested shares will be calculated at a discount of not more than 10% of the market price and bypassing brokerage fees. Thus I am getting more for my money.

 This is also a form of forced saving, making you more disciplined in handling your dividend payments. Apart from that you would be buying the shares regularly regardless of the price at the time and in the end the cost would average out and as your overall number of shares appreciates so does your wealth in the longer term.

I think it's a good scheme for me as I am not really able to monitor the daily stock prices and have much earlier on made a decision to stay with TM for the long term.