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Can We Do Away With Paper Dividend Checks?

Tuesday, September 3, 2019  
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A month or so ago, Liz Dunshee, one of the three wonderful bloggers on the incomparable thecorporatecounsel.net blog, e-mailed the following question to us, that she’d received from a subscriber: 

“Has anyone implemented plans to eliminate (or reduce) your stock transfer agent costs associated with issuance of quarterly paper dividend checks?  Have you passed the paper check charges along to your shareholders, or implemented mandatory electronic deposit, or mandatory DRIP enrollment, or some other idea?  Can you point to any legal issues that need to be reviewed before “eliminating” paper checks?  Thanks!”

Here’s what we wrote back: Wow! And how timely! In the last issue of the Shareholder Service OPTIMIZER, we asked readers if they are paying “high 20th-century prices” for services that are totally outmoded in the 21st century.

The paper dividend check should, perhaps, be “People’s Exhibit A” for ways a company can reduce and/or re-orient their shareholder-servicing budget, by thinking in a 21st-century manner - and by paying attention to “details”.

For starters, when it comes to dividend disbursements, the biggest potential cost-saver - by a country mile - is to move from a quarterly to an annual disbursement schedule: Many public companies are paying $.25 per check for issuance and another $.55 or so per item for the check itself, postage, a “stuffer” and the envelope. So a company can save at least $2.40 per-shareholder per year this way. But, in addition, paper checks generate added costs - that are usually embedded in transfer agent fees schedules or in their “flat-fee arrangements” - for things like replacing lost, destroyed or outdated checks, to account for and follow-up on - and eventually having to escheat - funds left-behind by careless and/or truly “lost” shareholders…So be sure to negotiate appropriate fee reductions if you move to an annual or semi-annual disbursing schedule.

Read the full article here:https://optimizeronline.com/can-we-do-away-with-paper-dividend-checks/