What dividend? Most investors are taking the scrip shares instead of cash, so it's effectively like a 102:100 stock split every quarter as your ownership % of SAN pretty much the same so you aren't gaining anything.
The company is shrewd, most distressed banks simply cut the cash dividend to conserve cash and improve their capital ratios, by SAN offering scrip shares, they effectively accomplish the same thing (since most are taking the shares instead of cash, in part to avoid the high Spanish withholding tax).
Don't get me wrong, I still like SAN, they're a well run company that gets a bad rap for being domiciled in Spain (even though the majority of their revenue and profit come from outside Eurozone) and I like their long term potential, especially at current valuations, just don't kid yourself into thinking this 10% dividend is real. Hopefully their biz continues to improve in 2013 and they stop offering scrip next year.
My thoughts are that most people take the scripts because they think SAN is currently undervalued and the scripts enable people to purchase more shares of an undervalued company rather than pay a withholding tax on the dividend. That's what I have been doing. When Europe's fiscal crisis settles down SAN should be more fairly valued, and therefore the increased number of shares worth considerably more.
I take the stock to avoid the tax. This morning, I sold the dividend shares for 8.06. What is my % yield? I figure it at slightly over 9.7% annualized. What is "unreal" about this? Incidently, I hate drips as I already own as much of a stock as I want. Why should I add to the risk by risking stock dividends? Of course I am in a position where income is impotant and, secondariy, the preservation of capital.
I disagree with your analysis. You may choose to take the script or the money. If you choose to take the money it equates approximately to a 10% return .The fact that some govt wants a bit of it doesn't affect the actual return any more than having to pay a 15% tax on your dividends on your US domiciled companies affected the actual return on your investment in them.Would you say your 3.5 % return on the GE dividend isn't really 3.5 because Uncle Sam wants part of it.In addition there are non US investors here who may be treated differently. Finally I believe if you hold it in a non tax exempt account you can file for a return of the withholding.