Wesfarmers Ltd (ASX: WES) is one of ASX's oldest dividend paying shares.
The company has been handing investors a portion of its profits every half since 1985 – 2 years earlier than the ASX's formation.
The ASX came together in 1987 when 5 different state-based stock exchanges merged into the one we now know and love.
On top of that, most of Wesfarmers' dividends have been fully franked.
But owners of Wesfarmers shares might not know their dividends can serve a different purpose.
Their payouts can help them increase their hold in the company without paying brokerage fees through Wesfarmers' dividend reinvestment plan. Let's take a closer look at what the plan entails.
As of Tuesday's close, the Wesfarmers share price is $49.02.
The nitty-gritty of Wesfarmers' dividend reinvestment plan
Owners of Wesfarmers shares are likely used to a cash dividend being deposited into their bank account every half year.
But there's another way they can benefit from the payout. Wesfarmers offers a dividend reinvestment plan.
The plan sees the company's dividends paid via shares instead of cash. And those shares might come at a discount to the market price.
By opting into the plan, shareholders will receive a number of shares to the value of a dividend payout, with the company able to offer a slight discount on market price.
Any remaining balance – that is, a portion of a dividend payment that doesn't amount to the value of a full share – will be rolled over to the next dividend payout.
Shareholders can also choose to partly participate in the plan, opting for only a portion of their shares' dividends to go towards increasing their holding.
Additionally, participation in the plan doesn't change a shareholder's tax position with respect to the dividend payment.
Finally, the company can choose whether to offer new or existing shares through the dividend reinvestment plan. It can also suspend the plan at any time with a month's notice.
Sadly, not everyone can get on board with Wesfarmers' dividend reinvestment plan. Only shareholders with an Australian or New Zealand address can opt in.
Wesfarmers' next dividend will likely be announced alongside its upcoming full year results. They should hit the market on 26 August.
