Everyone loves a freebie, but it’s very frustrating when a company teases you with an offer which you can’t actually get your hands on. Welcome to the world of shareholder perks, a reward that many investors struggle to obtain, either because their broker is unhelpful or the system requires extra expense to prove ownership of certain stocks. Fear not, as we have found a way for many shareholders to get their hands on the goodies.

Lots of companies on the stock market will give their investors discounts off goods and services. This might be free beer, money off coats and handbags, or even a chunk of cash off a new car. These rewards are often paid on top of cash dividends, meaning that investors are getting additional benefits than you might initially realise when putting money into a certain stock.

Shareholder perks shouldn’t be the primary reason why you choose a particular company, but factoring in their monetary value in addition to expected returns from dividends and capital gains can help swing an investment decision.

Therein lies a big problem. Historically these rewards have been hard to obtain - or you might not simply know they exist in the first place. Anyone using one of the mainstream share dealing platforms to buy equities would typically only receive communication from the platform provider about dividends and annual reports if you’re lucky. Very rarely would you be told that there are vouchers and other goodies to be had; that’s because this would require additional work from the platform provider. They would probably argue that this administration cost would push up the overall cost of dealing.

Another problem is down to recognising you as a shareholder in order to qualify for the perk. If you buy shares via a stockbroker they will typically be held in the broker’s nominee account and the name on the share registrar will be the nominee name: ie. your stockbroker. This causes two issues: some companies won’t give perks to nominee shareholders as they cannot see an individual’s name on the register; and even if they do some stockbrokers make it very difficult for you to get the perks and may even refuse to pass the perks on at all, because of the aforementioned administrative hassle.

Magic paper

An expensive solution is to have share certificates which is proof of ownership. The cost can be prohibitive and dilute any benefits from the shareholder perk. For example, Selftrade charges £20 to issue a paper certificate, the fee applying to each line of stock that has to ‘rematerialised’ - this is the process of converting electronic shares to paper shares.

‘If a customer is looking to get the shareholder perks then, yes, it is best if they hold the shares in their own name rather than a nominee,’ says Charles Galbraith, managing director of AJ Bell Youinvest.

Rebecca O’Keefe, head of investments at Interactive Investor says it isn’t such a clear-cut decision. She comments: ‘Investors have to weigh up the benefits of nominee accounts - including lower charges, regular investing and dividend reinvestment against the costs of holding the shares directly. Generally speaking, unless the shareholder perk is significant and only available when held directly, the benefits of a nominee account outweigh the limitations and costs involved in holding shares in paper form.’

A helping hand

Fortunately, some share dealing providers can be of assistance with shareholder perks as long as you call them directly. This applies to Alliance Trust Savings and Hargreaves Lansdown, for example.

There even are a few share dealing companies who are proactive and contact you when there is a reward on offer. The Share Centre says whenever it receives, or becomes aware of, a shareholder perk it will endeavour to obtain this on behalf of all its nominee shareholders and arrange delivery directly, wherever possible.

‘In some cases shareholders will have to ask us to provide confirmation that they hold the appropriate share and contact the company directly to obtain the perk,’ adds Julie Froment, dividend and shareholder rights executive at The Share Centre.

TD Direct Investing customers don’t need a share certificate to get shareholder perks, claims the company. Spokesperson Paul Amourdedieu says TD nominee account holders would get the same rewards as a paper shareholder. ‘TD makes no extra charge for this service,’ he reveals. ‘Customers who want to take advantage of perks simply identify this in their online voting preferences or phone us and we register them directly with the company registrars.’

Amourdedieu says TD doesn’t offer any online assistance to help with perks, as each plc company scheme tends to be unique in how it is run. However, he says customers can often use a statement of their holdings direct with the registrar in order to prove share ownership and these can be downloaded from the TD website.Whatever the perceived or monetary value of a perk, you should never use it as the sole reason for investing. The perk has no bearing on the performance of the stock and in the vast majority of cases the value of the perk won’t be sufficient to offset the investment and associated risks. It’s a very expensive way of receiving a freebie, particularly if the share price falls.

Nominee availability

There are a few stocks where claiming freebies is difficult. Your broker won’t be able to access perks on your behalf if you hold shares in BT (BT.A) or InterContinental Hotels (IHG) because their discounts are only available to shareholders who own shares in their own name and not via a nominee.

A spokesperson for InterContinental says: ‘Our Shareholder hotel discount is available to all IHG registered shareholders. For security reasons, shareholders can only log in to the IHG Shareholder Hotel Discount website using their unique shareholder reference number. This is only provided to shareholders on IHG’s register of members.’

Fortunately, the majority of companies do give their perks to nominees and even if your stockbroker won’t pass the perks on, there’s a good chance you should be able to get them by contacting the company or their registrar directly.

Bloomsbury Publishing (BMY) has a form on its website where you can fill in your details, your nominee company’s details and the books you want to buy and a sales person will contact you with the availability and price of the books. Legal & General (LGEN) has a free phone number which all shareholders - certificated and nominee - can call to take advantage of its product offers.

Frankie & Benny’s owner Restaurant Group (RTN) says shareholders who want to get its discount vouchers have to contact their stockbroker and ask them to write to the Restaurant Group’s registrar with their details and the vouchers will then be sent to the stockbroker. There is no guarantee the vouchers will then be forwarded to the customer.

‘The only perks we pass on are those that can be issued to the customer if we send an email (or on occasion a letter) to the company confirming the shareholding in our nominee. Carnival (CCL) operates like this for its cruise discounts and Mitchells & Butlers (MAB) will also issue its vouchers directly to the customer if we confirm a holding,’ says Galbraith. ‘The perks are not sent to us because they go directly from the company to the customer, so we will not get involved if we have to ask the registrars to send the perk to us as the nominee.’

Star prizes

Once you’ve understood how to clear the hurdles associated with obtaining perks, what are the treats on offer? If you own shares in Mulberry (MUL:AIM) and fancy splashing out on one of their iconic Bayswater handbags for £1,000, the 20% shareholder discount on offer would be very welcome.

There are lots of reasons why companies offer these extra treats. Take Marks & Spencer (MKS) as an example: if you’re a regular shopper at M&S the shareholder discounts might encourage you to invest in the company; if you already own shares the discounts could entice you to shop in its stores; and if you like and use the discounts you’re less likely to sell your shares.

Young & Co’s Brewery (YNGA:AIM) says it offers discount vouchers for shareholders to use in its hotels to thank them for their support and loyalty. ‘This is to encourage them to share in our success and to experience our high quality, best in class pubs and hotels for themselves,’ says a Young’s spokesperson.

Merlin Entertainments (MERL) put perks in the spotlight when it floated on the stock market at the end of 2013. Buying shares in the Alton Towers and Legoland operator not only gave investors the chance to benefit from the group’s anticipated growth but it also came with discounted tickets to its attractions, helping to create even more buzz around its IPO.

Stockbrokers like Hargreaves Lansdown (HL.) and The Share Centre publish a comprehensive list of the perks available from UK-quoted companies, which they regularly update. We’ve reproduced that list as part of this article. As you’ll see there is a wide range of companies which offer perks, including retailers and travel and leisure stocks through to utility groups and life insurers.

All inclusive

There are some companies which offer perks to shareholders for the price of just one share. So for 179p you could buy a share in Bloomsbury and enjoy 35% off the recommended retail price of all of its books - although you would also have to factor in the cost of buying the share. For 450p you could buy a share in toy group Character (CCT:AIM) and get 20% off any products bought on the group’s website. Other companies offering discounts to all shareholders include Moss Bros (MOSB).

Discounts are the most common type of perk but there are some companies which offer gifts instead. Primark-owner Associated British Foods (ABF) will give a gift to shareholders who attend its Annual General Meeting. The gift typically consists of samples of the company’s products with a £30 retail value.

As well as money saving perks there are some more unusual offers available. If you’re a shareholder of National Grid (NG.) you can take advantage of its shareholder networking programme which runs over two days and includes visits to operational sites and presentations by senior managers and employees. The aim is to give shareholders a better understanding of the business. British Land (BLND) shareholders get invitations to sponsored exhibitions.

Santander’s (BNC) shareholder relations team hosts financial events throughout the UK where retail investors can meet the team and have their queries answered. It also organises an annual charity golf tournament and exclusive offers and competitions through its ‘I am a Shareholder’ website.

Although there are some companies which offer their perks to all shareholders, many demand a substantial investment before you qualify for the perk. To get the one-off 25% discount at Next (NXT) you have to buy 100 shares, which with its share price of £73.45 means an investment of £7,345.

Telecom Plus (TEP), which is trading at 824p, offers a 10% discount on services but you have to hold a minimum 1,500 shares at a total cost of £12,360. You’d have to invest £2,275 to get the aforementioned 20% discount at Mulberry and £1,398 to qualify for 40% off two adult Merlin annual passes or one family Merlin annual pass.

Terms and conditions

As well as requiring a minimum share purchase, companies apply other terms and conditions which you have to meet in order to get the perk. Aga Rangemaster (AGA), which gives a 10% product discount to holders of 5,000 shares, says the purchase must total at least £500, the maximum discount offered is £500 and shareholders can only use the discount once. Shares must have been held for a minimum of 90 days on the date of purchase and the offer can’t be used in conjunction with any other offer.

Housebuilder Persimmon (PSN) offers a 2% discount on the price of a new property to holders of 1,000 shares but you must have held the shares for at least 12 months and the maximum discount is £4,000 in any 12-month period.

Companies reserve the right to alter or completely remove the perks on offer so it’s important to contact their registrar to confirm they’re still available.

The removal of perks often happens when a company is taken over. P&O Cruises used to offer half-price ferry crossings in return for holding 600 shares but this ended when the company was taken over by Dubai Ports and delisted.

International Consolidated Airlines (IAG) stopped the 10% discount on fares offered to former British Airways shareholders on 31 January, and TUI Travel was required by German law to end its discount following the completion of the merger with TUI AG (TUI).

Subjective value

We’ve attempted to calculate the monetary value of some shareholder perks, but their value is personal to each individual investor. If you regularly eat out at Frankie & Benny’s then getting Restaurant Group’s vouchers for 25% off food and drinks would be a decent perk, albeit requiring an investment of £1,733.75 to qualify. Restaurant Group says these vouchers are ‘extremely popular and are widely used by shareholders’. By contrast, if you never shop at Next there’s little point forking out £7,345 just to get the discount although you would hold shares in a very good company that has historically returned lots of cash to shareholders.

‘The value to shareholders is often subjective. Accordingly, the relevance or perceived value can only be determined by that individual at the point it is received. A relative increase in the number of private investors on registers that offer benefits or who choose to attend general meetings where a form of perk - lunch, gift vouchers or a free gift - is offered suggests that there are still a significant number of private investors who see value in these offers,’ says Stuart Ellen, managing director of registration services at share registrar Equiniti.

A perk might look like a good offer but you should still check whether you’d get a better deal elsewhere. This is particularly relevant for Legal & General’s discounts on its home, pet, landlord and over-50s life insurance products, which it offers to all shareholders. ‘These discounts may not be greater than can be achieved shopping around for insurance products with other firms,’ notes Danny Cox, head of communications at Hargreaves Lansdown.

There was a joke back in the early 1990s that Philips Electronics was the highest-yielding stock on the Dutch market even though its dividend was minimal and occasionally cut to zero, in marked contrast to the company today. ‘This was because the firm then owned 80% of music and film maker PolyGram and at each Philips Annual General Meeting the company gave out a free compact disc to those shareholders who attended. At the time the retail price of a CD was around ten guilders and the Philips share traded in a range between four and nine, so you could argue the yield was somewhere north of 100%, including the CD,’ says Charles Galbraith, managing director of AJ Bell Youinvest.

‘Eventually, Philips stopped handing out the CDs and then in 1998 it sold PolyGram to Seagram so that was that, perhaps providing a reminder that perks can be changed or cut, just like dividends, even if Philips has since initiated regular dividend payments and run share buyback programmes.’

The changing nature of shareholder perks

(Click on table to enlarge)

The number of companies offering shareholder perks has reduced over the past decade, as has their generosity. Perks used to include hefty discounts on products, holidays and travel tickets and free days out at the company’s expense.

Share registrar Equiniti says perks have become less common due to the general economic downturn, tough trading conditions, the difficulty of measuring the relevance or success of a perk scheme and take-up being lower than the deemed minimum threshold. The introduction of online investment platforms and the corresponding reduction in shareholders holding shares in paper form hasn’t helped.

‘Some companies will offer their perks subject to qualifying criteria, i.e. a minimum number of shares. Others will relate more specifically to UK retail shareholders, which can mean that in some instances the perk qualifying criteria is limited by the geographical location of the shareholder and/or whether the shareholder is “name on register” or via a stockbroker nominee,’ says Stuart Ellen, managing director of registration services at Equiniti.

‘That said, although shareholder perks are less prevalent than they may previously have been, there are shareholder perks available today that are as valuable as those that have been issued in the past,’ he adds.

Companies have been known to become more generous with their perks. Next used to require people to hold 500 shares - equating to an investment of £36,725 - but it reduced it to 100 from 1 April 2015. Similarly, Bloomsbury used to give its discounts to investors holding 200 shares but these days you only have to hold one share.

Marks & Spencer's reward scheme

Marks & Spencer injected a new lease of life into shareholder perks in March when it launched its Dividend Plus scheme, in partnership with Equiniti. The scheme enables private investors to use the money from their dividend payout to buy an M&S Shareholder Card up to the value of £1,000 at a 10% discount of its face value. Shareholders can choose how much of their dividend they wish to use to buy the card and any remaining dividend balance is paid according to their current dividend instruction. Private investors had to sign up by June ahead of the next dividend payment, expected to be in July. The scheme isn’t available to nominee shareholders, although M&S is reviewing this situation.

Perks + Dividends = Tasty returns?

Associated British Foods (ABF)

£30.19

Dividend yield: 1.3%

Implied yield including perk (assuming you held 50 shares): 3.1%

50 x shares at £30.19 = £1,509.50

Forecast dividend per share for September 2015 =
34.36p x 50 = £17.18

Monetary value of shareholder perk = £30

(£30 + £17.18)/£1,509.50 x 100 = 3.1%

Because you can take advantage of Associated British Foods’ (ABF) giveaway of goods with a retail value of £30 just by owning a single share its impact on your implied yield increases the smaller your holding in the company. In this example we look at the implied yield, if this perk is included, to someone with 50 shares in the company.

Shares has a positive stance on the global foods, ingredients and fashion combine, a running Play of the Week. Expansionist discount fashion chain Primark is the jewel in the ABF crown and the growth engine for the years ahead. The budget fast-fashion chain is expanding across Europe, delivering positive like-for-like growth, about to enter the US market later this year and offers investors access to a possible decade or more of double-digit organic growth. Associated British Foods’ in-line half-year results (21 Apr) included cautious guidance from management on the impact of US dollar strength and Euro weakness on annual earnings. The good news for investors is that each division except for sugar, hit by lower sugar prices yet where profits look to have reached their nadir, generated an operating profits advance. The improving quality of the business is a bull point, with the ABF emphasis switching from volatile sugars towards the resilient grocery and high-growth retail divisions. (TS/JC)

Merlin Entertainments (MERL) 436p

Dividend yield: 1.6%

Implied yield including perk (assuming you held the minimum 317 shares): 13.7%

317 shares at 436p = £1,382.12

Forecast dividend per share for December 2015 =
6.92p x 317 = £21.94

Monetary value of shareholder perk (assuming 40% off £418 cost of 2 premium adult annual passes) = £167.20

(£21.94 + £167.20)/£1,382.12 = 13.7%

As in the accompanying Mulberry (MUL) and Persimmon (PSN) examples, the impact on the yield of this shareholder discount looks dramatic but if you add the £418 cost of two annual adult passes to Merlin’s theme parks to the principal sum from which you derive the yield then it is reduced to a more realistic looking but still impressive 10.5%.

Merlin has had a difficult few weeks after 16 people were injured in a crash on its Smiler ride at Alton Towers. The accident will no doubt have an impact on ticket sales but the effect on the overall group should be minimal given that it’s an international business with a diversified portfolio of brands, including Legoland. Chief executive Nick Varney said in a results call on 14 May that he was positive about the outlook for the year, but admitted he was nervous about the strength of the pound versus the euro reducing the number of Eurozone visitors to London, where it owns attractions like the London Eye and Madame Tussauds. The company is accelerating its expansion plans and keeping an eye out for acquisition opportunities which could result in further growth, following a 3.3% rise in like-for-like revenue in the first 18 weeks of the year. (TS/EP)

Mulberry (MUL:AIM) 905p

Dividend yield: 0.61%

Implied yield including perk (assuming you held the minimum 250 shares): 89%

250 shares at 905p = £2,262.50

Forecast dividend per share for March 2016 =
3.24p x 250 = £8.10

Monetary value of shareholder perk (assuming 20% discount on £10,000 of product) = £2,000

(£2,000 + £8.10)/(£2,262.50) x 100 = 89%

Including the £2,000 value of the perk attached to owning shares in luxury goods firm Mulberry (MUL:AIM) transforms a miserly 0.61% yield into a whopping 89%. This value is only realised if you spend £8,000 on Mulberry products so arguably this should be added on to the principal sum on which the yield is based. Factoring this in to our calculation still generates an improved yield of 2%.

The English luxury brand’s shares have rebounded, having sold off heavily following a string of profit warnings and the departure of CEO Bruno Guillon, whose attempt to hike prices and take the bag maker upmarket proved ill-starred. Full-year figures (11 Jun) to March revealed a drop in adjusted pre-tax profit from £17.4 million to £4.5 million, ahead of downgraded expectations, while total revenue was down 9% to £148.7 million. Yet sales have seen a positive uplift since November, benefiting from the introduction of desirable new products across the entire range and a return to selling products in the accessible luxury price point. In the 10 weeks to 6 June, retail like-for-likes were 15% ahead year-on-year. Yet investors should be wary, since this uptick has been delivered against soft prior year comparatives. New CEO Thierry Andretta and incoming Creative Director Johnny Coca still have work to do to rehabilitate Mulberry in a more challenging luxury goods market. Interesting, but one for bold turnaround investors only at this stage. (TS/JC)

Persimmon (PSN) £19.73

Dividend yield: 5%

Implied yield including perk (assuming you held the minimum 1,000 shares): 25.3%

1,000 shares at £19.73 = £19,730

Forecast dividend per share for December 2015 =99.33p x 1,000 = £993.30

Monetary value of shareholder perk (maximum discount based on 2% off new property) = £4,000

(£993.30 + £4,000)/£19,730 = 25.3%

Plugging in the monetary value of Persimmon’s new home discount for shareholders (at the maximum £4,000) turns an already generous yield of 5% into a bumper 25%. If, as in the Mulberry example, we include the £200,000 cost of buying a home where a £4,000 discount is applicable and add this on to the principal, the yield is reduced to 2.3%.

As one of the ‘big five’ housebuilders, Persimmon’s economy of scale means that it is well-placed to continue capitalising on the UK’s seemingly insatiable need for new housing stock. When last we touched on the company in February, we remained buyers of the £6 billion cap but we raised a note of caution on the grounds that growth in the forward order book had slowed markedly from a year-on-year improvement of 28% at the half year to June to 7% for the full year to the end of December 2014. A trading update in April suggested that customer confidence continued to be supported by ongoing improvement in the UK’s economic performance, while at the same time, the mortgage market continued to offer customers the opportunity to access mortgage credit on very attractive terms. Since that update, even greater certainty has returned to the sector in the form of a Conservative majority in the May General Election and the housing market jitters that preceded this have well and truly abated. (TS/SFl)