Santander is about to say goodbye to the scrip dividend, a strategy of retribution to the shareholder inaugurated by the bank in 2009, under the baton of Emilio Botín. Not including the November 2018, the entity has launched 21 election dividends through which it has issued 4,063.7 million new shares. That is, through this formula the bank has increased capital by 25.18%.
This percentage is not far from the achieved through the three expansions made since the outbreak of the crisis in 2008. With these operations (two of them under the chairmanship of Ana Botín), Santander has captured 21,700 million euros and has put into circulation 4,270.6 million new shares, representing 26.46% of the capital. As a result of these strategies (actual extensions and scrip dividend) in the last ten years the number of shares of the bank has doubled, from about 8,000 million shares at the end of 2008 to the current 16,136 million.
Santander was the first listed company that brought the scrip dividend to the Spanish market. At a time when many companies were forced to cut back and even eliminate shareholder remuneration, the entity decided to keep the payment stable in exchange for replacing the cash in this formula. The dividend election is nothing more than a capital increase in which the shareholder must choose between charging the amount in cash (which equals the traditional dividend), opting for the new shares or selling the preferential subscription rights in the market.
The strategy implemented in November 2009 was gaining presence gradually. In 2010, two of the payments were made through this formula; in 2011, three and four already in 2012. This quota remained unchanged until 2015, the year in which the current president Ana Botín gave a 180 degree turn to the remuneration policy. In exchange for cutting the dividend by 66.6% against the results of that year (it went from 0.6 euros per share to 0.2 euros per share), the listed company reduced dividend payments by one to one . The November 2018 is already the last one made under the umbrella of this formula. As of 2019, the four coupons will be paid in cash and hard currency.
The scrip dividend has allowed Santander to reduce considerably the disbursement of money that would represent the cash payment of the traditional dividend, especially during the period 2012-2014. This is due to the fact that most of the shareholders kept the shares, which are the default option for the listed companies and which, after the tax reform of Cristóbal Montoro, was the only tax-exempt alternative. However, separate tax measures, in the case of Santander, the percentage of investors that have opted to receive new securities has been around 80%.
Those who have paid the scrip dividend bill have been the shareholders themselves. All those who did not opt for new titles diluted the weight of their participation. Therefore, if the objective was to maintain a certain percentage of shares in their hands, they were forced to sacrifice cash for the new securities.
The negative effects of this formula do not remain there. In the last nine years, the market has witnessed the erosion of earnings per share, a ratio resulting from dividing profits by the number of shares outstanding. Thus, earnings per share have gone from 1.22 euros in 2008 to 0.42 euros in the last 12 months according to Bloomberg calculations.
The change in Santander's remuneration policy was felt in the dividend yield, which fell from 8.8% in January 2015 to 5.16% today. A lower data, but more adjusted because most of it is in cash.