I use FSM and I have experience regarding the dividend handling fee structure. I have also enquired via live chat before.
I own a few US counters in FSM and the dividend handling fee is payable on every dividend handled. In my enquiry to them, the reason for a dividend handling fee is due to a fee being charged by their counterparty.
If your gross dividends for the dividend payout is less than USD 2.50, then you will not be charged anything.
If your gross dividends for the dividend payout is more than USD 2.50, then you will be charged according to their dividend handling fee structure (min USD 2.50 or 1% whichever higher, max USD 25).
You hold 10 shares of company A and there are 3 quarterly dividends of $0.50 per share and a final dividend of $0.25 per share, which gives you a total dividend of $5 per quarter in the first 3 quarters and $2.50 for the fourth quarter.
Quarter 1: Total Dividend $5 => Gross Dividend $3.50 (due to 30% WHT) => Dividends Received $1.00 (due to dividend handling fee)
Quarters 2 and 3: Per Quarter 1 above
Quarter 4: Total Dividend $2.50 => Gross Dividend $1.75 (due to 30% WHT) => Dividends Received $0 (Gross Dividend < Charges)
For the avoidance of doubt, there will be no deduction for the shortfall in charges for Q4.
Finally, for completeness and to ensure an accurate portrayal of my average cost, I add the dividend handling fee as “FEES” to my holdings.