Sterling Investments Ltd (SIL) has launched two new programmes to augment its product offerings to clients – Dividend Reinvestment Programme (DRIP) and Complementary Share Purchase Programme (CSPP).

DRIP allows shareholders to automatically use dividend payments for shares already owned to purchase additional equity in the company, while with CSPP shareholders and clients can buy new stock on a quarterly basis (March 31, June 30, September 30 and December 31) from the company.

Both programmes facilitate new stock purchase at intervals without going to the secondary market for sellers or waiting for an initial public offer, plus with no brokerage fee.

“Well, let’s put it this way, it’s like an ongoing rights offer and it’s at the discretion of the shareholders,” SIL director Charles Ross stated at a press conference at the Jamaica Pegasus Hotel in New Kingston on Thursday. He stressed that DRIP is an “option share purchase”, as shareholders can choose to take cash instead.

However, Ross noted that the introduction of the DRIP and CSPP is a “proactive proposition”, and that shareholders should be encouraged by the performance of the company and the benefit of getting shares without going to the market.

SIL recorded a 93 per cent increase in net profit for the second quarter, over the corresponding period last year, from $32.7 million to $63.2 million.

Yanique Ebanks-Leiba, Assistant Vice-President, Trading and Business Development, highlighted the fact that by introducing the two new programmes – which are “common mechanisms” found in the US and European equity markets, but underused in the Caribbean – the company was a “guinea pig” of sorts.

Nevertheless, she predicts that other financial service providers will follow suit, with some taking a wait-and-see approach.

“…We’re the first in Jamaica to introduce these to the market here…” Leiba said.

“…Because it’s the sort of thing that is very important for the markets here… it’s something that a lot of the sophisticated investors are coming out [for]… It’s long overdue and we’re looking for other companies to get on board,” she continued.

Asked if the liquidity of shares will not result in a dilution of share price and return on equity, Ross responded that over time the SIL expects demand to exceed supply, and therefore the price of shares will increase. Furthermore, according to Ross, both DRIP and CSPP were introduced to meet demands of shareholders who wish to increase their share capital.

“We don’t expect that expanding the size of the portfolio will lower the return. In fact, with a larger portfolio you really have more options in terms of diversification, and… you will have more funds at your disposal, and you’ll be able to take more meaningful positions in the marketplace…there won’t be any dilution,” Ross reasoned.

On April1, SIL became the second company to enlist on the JSE USD market, after Proven Limited.