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But the buy back hasn't finished yet ... its barely started -- unless there's been some kind of news/RNS that I haven't seen. So far we've only had 8 trading days worth -- most buy backs seem to go on for 3-4 months. If that's the case here, then over 100 trading days we would be looking at £150m+ and that's a lot more than the trival 9p per share that the present numbers already give. (More like half the annual dividend in fact) And the major point is ... compared to the certainty of a share dividend, what does the buy back give us/me? For a long term holder any share price increase is one off at best, gained only when the holding is sold ... and any increased earnings per share is vulnerable to being used to buy more shares back rather than being paid out as dividends. From a long-term, income driven holder's perspective what's going on doesn't look good news. I'll stay in until the next set of results are posted, review what happens to the dividend then and make a decision accordingly. Mike
Including today's RNS, they've spent pennies under £13M to remove 457k shares. Based on 138.8M shares which is what the dividend pool of £277.7 M per year is supposed to be based on (IIRC - please correct me if not), the buy back means that the March dividend of £1/ share will be reduced by about £0.09. Subsequent dividends from Sept onwards (if the whole thing froze right now) would be higher by about £0.003. By my table, based on the pay out plan to Sept 2021, the scheme has a net cost of about £0.06/ share so far. Whether you think that the SP has been supported by more or less than £0.06 I guess is the crux of whether this has been a sensible use of shareholder funds. Personally I am leaning towards thinking no and I'd rather the SP was allowed to find it's own level and if I thought it was undervalued I'd buy more. That said, if the SP suddenly jumps up into the 30's then I might see the buy back as having been genius :)
Why? ... because the company is spending £2-3 million of the dividend fund every day on buying back its own shares. (est 20-30 million so far) ... and that's money that's not going to be paid out as a dividend. So, if you're investing for the dividend income the future is uncertain now. So far I estimate they've spent 10% of the annual dividend on the buy back scheme, and that means the dividend could well go down by that amount -- and if they continue this buy back it will only get worse. Mike
Why?
yeah, i know what you mean, i was looking at this one mainly with the mid-long term in mind, and the dividend as well, now i have the funds, but am seriously doubting this option now
Well let's hope that I'm wrong ... one thing that offers some hope is that the BoD have called fro an EGM on 23 Feb to alter the LTIP (Long Term Initiative Plan). If the changes make the plan effectively neutral to the effects I mentioned then they are at least re-levelling the playing field. On a personal level though I'm not at all pleased to see the dividend decrease as it was for the long-term income generation side of things that I valued these shares ... that may all change as we start to understand what the changes actually mean in terms of numbers. Fingers crossed. Mike
Thanks Adam, if you are right, seems i was right to be skeptical of the buy back scheme and reduced dividends
Artifically increasing the EPS by buying back your own shares is the usual underhand way that this scheme works ... depriving the shareholders of funds and virtually guaranteeing that the bonus is paid. But here I believe that the bonus scheme is based on 'Return on Capital Employed' ... by reducing the capital base of the company (by buying and cancelling shares) the same return looks better and there is an increased chance that the bonus will be paid -- same result as before but a slightly different mechanism. And the bonus here is very, very significant ... I seem to recall the press saying that it was £280 million split between four executives? As I say, with bonuses that large triggered on somthing that might be manipulated via a share buyback, the BoD may have their interests at heart rather than ours. I'm also concerned at the size of the buyback that is in progress ... £2-3 million per day ... Mike
Dividend vs. Share Buy back is an easy comparison .... it compares 100% certainty of payment of dividend against an almost 100% guarantee of executive bonus payment -- coupled with a hope of increased share price and a possibly increased (but probably decreased) dividend payment. Overall I am against share buy backs ... they are generally a sign of an inward looking board that are more interested in protecting/promoting their own bonuses than transferring money to their share holders. In short they may have their interests at heart rather than ours. Mike
curious regarding the dividend vs share buy back scheme. Trying to work out if i want to invest in this one, but having been watching it for a while, i think i'll need to invest more than i usually do in a single share, to make it worth while, i am slightly kicking myself, because i know when it was in a slump, i didn't have the funds to invest, and now it's recovered to a point where i would have had a nice cushion, so now i'm back to the stage of trying to work out a good entry price, which given the current political climate...... a task which seems considerably harder !!