By Jessica Cheam

DBS Group Holdings is proposing a scrip dividend scheme for its shareholders, in a move that analysts suggest will help shore up its cash and capital position.

The scheme also means shareholders would be given more choice - the option to receive future dividend payments in the form of DBS shares or preference shares, cash, or a combination of cash and shares.

The bank said yesterday in a statement to the Singapore Exchange (SGX) that it would hold an extraordinary general meeting at the DBS Building on April8 to seek shareholder approval to issue new shares as part of the scheme, among other proposals.

More details will be included in a circular to be sent to shareholders today.

This move comes hot on the heels of OCBC Bank's move last month to reactivate its scrip dividend scheme to give shareholders the option of getting its final payout of 14 cents a share for the year ended Dec31 in the form of shares.

It had obtained shareholder approval back in 1996 for such a scheme, and is sweetening the deal by giving a 10per cent discount for the new shares.

Tough economic conditions have led to a recent trend that has seen firms such as Midas Holdings and Noble Group introduce scrip dividend schemes, made easier by the SGX's recent relaxation of some of the rules.

The exchange has scrapped the need to seek shareholder approval to offer the scheme, as long as shareholders are given the option of receiving their dividends in cash.

According to exchange regulations, the price of new shares issued as dividend payments cannot be at a discount of more than 10per cent to the market price.

Analysts have noted that the trend to 'conserve cash has begun', with firms cutting back on dividends.

DBS, like Midas and Noble, will allow shareholders to opt for a mix of cash and shares.

DBS said yesterday the scheme would not be applied to the final dividend for the year ended Dec31.

Unlike OCBC, it did not mention any discount for any new shares.

The board of directors 'will have the discretion to determine to which dividend the scheme will apply' and an announcement will be made as and when such a decision is made, DBS said.

But given that the current depressed market has reduced the share prices of many stocks to multi-year lows, some investors may find the offer attractive.

DBS said shareholder approval would also be sought at the meeting for a renewal of the bank's share purchase or buy-back mandate, and the extension and modification of an employee share-based incentive plan.

DBS shares ended up 16 cents at $7.55 yesterday.

This article was first published in The Straits Times.