A scrip dividend or flexible dividend is a form of shareholder remuneration in which the company, instead of paying only cash, offers a choice between receiving new shares, selling the allocation rights or receiving cash. It is implemented through a bonus issue charged to reserves.
How a scrip dividend works
The company approves a bonus issue charged to reserves and allocates free allocation rights to each shareholder in proportion to their shares. With those rights, each shareholder decides what to do.
| Shareholder option | What they receive | What it implies |
|---|---|---|
| Subscribe for new shares | More shares, without cash outlay | Maintains their percentage in the company; receives no cash today |
| Sell the rights to the company | Cash, for the amount of the purchase commitment | In practice, it is equivalent to receiving the dividend; the price is set by the company in advance |
| Sell the rights on the market | Cash at the market price of the right | Only in listed companies with tradable rights; the price fluctuates during the window |
That choice is where the name flexible dividend comes from: the company proposes and each shareholder decides whether to take cash or capitalize.
Why listed companies use it
The main reason is cash. A scrip allows a company to maintain periodic remuneration without paying out all the cash that an ordinary dividend would require: the portion of shareholders who choose shares is paid with new capital, not cash. That gives room in years of heavy investment or a stretched balance sheet, and shifts to the shareholder the decision between income and reinvestment.
The cost is dilution. If part of the remuneration is paid with new shares and the company does not buy back and cancel shares afterwards, those who choose cash lose relative weight year after year. The most careful remuneration policies combine scrip with buyback programs that neutralize the capital increase; without that complement, scrip looks more like a disguised capital increase than a dividend. It is the first thing to look at when evaluating, as an issuer, whether this formula fits your remuneration policy.
Taxation, in general terms
The tax treatment differs depending on the option chosen, and that is part of the appeal of the formula. In general terms, in Spain: receiving free shares is not taxed at delivery, because the new shares take the acquisition value of the old ones and tax is triggered on sale; receiving cash under the company's purchase commitment is taxed as a dividend; and selling the rights on the market is taxed as a capital gain. The specific rates, withholdings and nuances depend on the regulations in force each tax year, so it is advisable to review them with a tax advisor before making decisions.
Programmable corporate events in tokenized securities
A scrip dividend is, at its core, a corporate event with deterministic rules: dates, allocation ratios, options and election windows. That nature makes it suitable for tokenized representation. In an issuance with securities on a distributed ledger, the issuer can program the event calendar, the allocation of rights and the settlement of each option on the ledger itself, with fewer manual back-office steps and complete traceability of who chose what. How these flows are structured, from cash dividend to scrip, is explained in on-chain corporate events and tokenized dividends.
The starting point is that the instrument is a security token, that is, a transferable security represented on a distributed ledger. If you are considering whether your next capital transaction will be represented in traditional or tokenized form, the comparison is in tokenized equity vs. capital increase.
Frequently asked questions
What is a scrip dividend?
It is a remuneration formula in which the company, through a bonus issue of capital, grants free allocation rights to its shareholders. Each shareholder chooses between receiving new shares, selling the rights to the company for a set amount, or selling them on the market. Because of that choice, it is called a flexible dividend.
Does a scrip dividend dilute shareholders?
It can. Those who receive new shares keep their percentage; those who opt for cash are diluted compared with those who take shares, unless the company buys back and cancels shares to offset the capital increase. That is why it is worth checking whether the scrip policy is accompanied by a buyback program.
How is a scrip dividend taxed?
It depends on the option. In general terms, receiving free shares defers taxation until sale, the cash from the company's purchase commitment is taxed as a dividend, and selling rights on the market is taxed as a capital gain. The specific rates and withholdings depend on the regulations in force each tax year.
Do you want to program the corporate events of your next issuance? Take the issuance diagnostic (2 min) or request a proposal. If you prefer to start by reading, download the 2026 guide.
This content is informative and educational. It does not constitute legal, tax, or investment advice. Check the current version of each regulation in the BOE and on EUR-Lex.
HokenFi is a software and infrastructure provider; it does not provide regulated services (CASP, ESI, EAF, or ERIR). This article is informative and does not constitute financial or legal advice.
