Sterling Investments Limited (SIL) recently became the first company listed on the Jamaica Stock Exchange to introduce a company Dividend Reinvestment Program (DRIP) and a Complementary Share Purchase Program (CSPP), SIL announced in their Press Release. While DRIP’s and CSPP’s are common mechanisms found in the U.S. and European equity markets, the structures remain underutilized in the Caribbean region.
The DRIP allows shareholders to automatically use the dividends on their shares to purchase more shares in the company free of cost. It can be compared to a “standing order” on your checking account which siphons off money for savings at regular intervals. “By purchasing more shares without broker fees or commissions, the average cost basis of the investor’s position can be lower than if the shares were purchased in the open market” explained Yanique Leiba Ebanks, AVP at Sterling Asset Management.
A Complementary Share Purchase Program allows shareholders to purchase newly issued stock in the company once a quarter without having to participate in a rights issue or find a willing seller. This program is also offered free of cost to existing shareholders. According to SIL Director Charles Ross, the programmes were introduced in response to strong demand from existing and prospective shareholders who were having difficulty purchasing shares. “Investors will now find it much easier to buy shares in the company”, Ross said. He added that “The innovation would not have been possible without the Jamaica Stock Exchange and the Jamaica Central Securities Depository (JCSD). Both entities have been tremendously helpful and progressive. We could not have introduced these programs without their assistance and hard work”.
With a P/E ratio of 5.74 – SIL is one of the cheapest stocks on the JSE. The company’s equity base has tripled since inception less than 4 years ago and it pays dividends in US dollars.
