Do you own ANZ Group Holdings Ltd (ASX: ANZ) shares? You might have noticed talk about 'neutralisation' from the bank lately.
It relates to its upcoming interim dividend. Specifically, the dividend reinvestment plan (DRP) offered to investors.
Under a DRP, investors can opt to receive their dividends in the form of shares, rather than in cash.
So, what does it mean and how might it impact shareholders? Let's take a look.
Right now, ANZ shares are trading for $23.99, 1.48% higher than its previous close.
Comparatively, the S&P/ASX 200 Index (ASX: XJO) is up 0.7% at the time of writing.
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ANZ embarks on 'neutralising' shares issued through DRP
ANZ is about to embark on a mission to buy back a number of its new shares. Approximately $327 million worth, in fact, as the ASX 200 bank revealed today.
But it's not a means to return capital to shareholders, like most on-market share buybacks.
Instead, ANZ's new buyback will aim to neutralise the impact of shares handed to investors engaging with the company's DRP for its upcoming interim dividend.
That means no new shares are expected to be created for the purpose, therefore the bank will avoid diluting its earnings over additional stocks.
That's good news for investors. A fitting visualisation of share dilution for a Friday afternoon is one offered by my Fool colleague Mitch earlier this week. He wrote:
Like enjoying a bottle of red among friends… if another glass turns up, that means less red going into yours …
If an ASX stock you own continuously increases the share count over time, your share of earnings will grow smaller and smaller. And, where earnings per share (EPS) goes, the share price will eventually be sure to follow.
ANZ has appointed UBS Australia to execute its planned $327 million on-market buyback.
Further, the pricing period for the DRP has kicked off today. The ANZ share price over the 10 trading days ended 1 June will determine how many shares an investor receives in return for their dividends.
ANZ declared its 81 cents per share, fully franked, interim dividend earlier this month. It's expected to hit shareholders' accounts from 3 July.
