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Thanks ECRyder, I appreciate that, but that's why I used the word "if". Having read many of the comments on here and seen the various confusion, this was just my attempt to break the whole thing into easy-to-understand stages to make things simple to understand. In reality, in this case, there is no "ex-dividend but pre-consolidation" stage. If my posting has caused more confusion, that's the exact opposite of its intention and I'm sorry for that.
Regards,
Mike.
ECRyder,
Regarding tax, I'll wait and see what my end-of-year consolidated tax certificate from my broker looks like. If they include this dividend along with all the other dividends from my other shares, I'll just have to go along with it and declare it as dividend income on my self-assessment return. If they don't include it, or annotate it differently, I'll deal with it appropriately.
I have had a situation before - I forget exactly which company - where capital was returned by the firm making a "tender offer" for 1 in 5 of every shareholder's shares, and in that case it was absolutely clear that it was a return of capital and *not* a dividend. That was about 15 years ago, so maybe things have changed since then.
Regards, Mike.
Mike There can only be two SPs to consider. Because the buyback and consolidation take place at the same time. The £1.88 SP you mention will never show on Tescos share info. Its just a theoretical figure in peoples heads to account for the reduction in shareholders holding due to the special divi payout. But the consolidation immediately accounts for that loss, with less shares within the same market capitalisation. The MC can not be changed.
Mike
HMRC will treat "return of capital|" as a dividend for taxation purposes. Just as they do for both ordinary and special dividends.
Sorry ECRyder, I don't understand what you're saying. My "Pre-dividend" figure is the situation "now", and the £2-40 is meant to represent the share price now (as an approximation). Maybe I'm being thick?
Rgds, Mike.
Nige
The short answer is "Yes" - especially if you go the full 9 yards to final divi payout. The strengthened company will bring the benefits as well. Its impossible for you to be worse off. It seems the general question people are asking is "Is the buyback worth it?" or "should I bail out now?" (But too late now). I repeat - You do NOT need nerves of steel for this one.
Just think of the companies that are currently not paying any dividends and absent of any prospective benefit at the moment due to Covid. Tesco final results after 28 Feb 21 are very promising with increased online sales which are likely to be permanent - and they are the leader in the market share game and particularly in increasing online sales.
Sorry Nige(7),
Our replies "crossed" in the electronic post!
Generally, it appears to have been designed to be "neutral", ie neither benefit nor disadvantage, but the outcome for each individual shareholder will depend on his/her individual circumstances. In my own case, for example, I will now have to pay some income tax on some of the dividend - luckily only 7.5%. For higher-rate taxpayers, they may have to pay 32.5% on some or all of their dividend (all depending on where I/they sit in relation to this year's £2,000 nil-rate allowance for dividends. So being taxed to stand still!
*But*, as some have said, this is supposedly a "return of capital" rather than a "normal" dividend so there may be ways round that problem. Everyone's circumstances will be different.
Rgds, Mike.
Mike One set of figures is wrong. Pre dividend comment is wrong. You should be saying 19 shares at £2,40 because the consolidation has not yet taken place......
Purely mechanistically, and using "round" numbers to make it clear, and starting with 19 shares to avoid fractions.
Pre-dividend:-
Shareholder has 19 shares currently priced @ £2-40.
Ex-Dividend (if there were no consolidation):-
Shareholder has 19 shares priced @ £1-89 plus £9-67 cash.
Post-Consolidation:-
Shareholder has 15 shares priced @ c £2-40 plus £9-67 cash.
Then "market" factors take effect...
Or is this over-simplistic?
Mike.
Mike,
So we should see some benefit then?
Cheers
Nige
Nige7,
It's gone into a large cash dividend into shareholders' pockets (unless reinvested via DRIP etc).
Mike.
So basically 5 billion has evaporated into thin air!! Where has it gone??
reduced pension deficit - enhanced profits - Tesco is a fantastic company - incredible footprint - plenty of upside potential - a strong buy - target price £3.13 by finals day..
Dave Ocado do not pay a dividend, But Unilever is at an near all time low, and pay a quarterly divi at near 4% per annum. Maybe a better bet for you ?
You are actually right Dave. There is a possible benefit (if Tesco have judged market sentiment right) in the shares rising in the same proportion as the consolidation ratio 19 divided by 15, which brings the £2.42 baseline 22/1/21
price up to £3.06. Whether that happens - or not is moot. But in theory 100 shares for eg in a 50% consolidation would double their value, because the market capitilisation is not changed by the buyback.
Re the Dave Lewis remark - a cynic might suggest that a compulsory buyback is a device to make the final results on 28 Feb 21 ( just 13 days after the consolidation date coincidentaly) look better for management. Example: Earnings per share will magically rise due to less shares. The question is "Will the divi rise by at least the same proportion?". It SHOULD given that we the shareholders have financed it by our lower holdings post consolidation. DLs remark about giving back to shareholder after the accounting scandal can not be argued with, but whether that is the real reason, or a "sub reason" is for the owners of the company - the shareholders - to decide.
It is simply a return of capital whilst continuing to have the same proportion of ownership. There will also be a stronger balance sheet as a result of the pension deficit, disposal of one loss making business and additional working capital.
No idea why this is being called "special dividend", it's actually a compulsory share buy back. there is absolutely NO dividend at all. Once all the dust has settled I will get rid of my Tesco holding and buy another chunk of Ocado to make some REAL money that I can keep.
Tesco share price in a 'This is money' portfolio is currently showing
an ex special payment/pre consolidation price.
I'm sorry to tell you you'll be no better no worse off, You'll end up with whatever you started with.
THIS IS FOR yr11-shx
Every little helps!! :)
Every little helps!! :)
Dave Lewis (ex CEO) said that he wanted to reward shareholders for their patience and that 5 billion of this Asia sale would be returned via a SD! He said said that it would help shareholders who lost out after the accounting scandal!
What are we supposed to believe!?
I have got a side bet on with one Mr W. Buffett of Omaha. His entire fortune against my meagre £2000 Tesco holding. He says next weeks price will be price . £2.75. I say £2.45. It's death or glory .....
Worth mentioning that if your holding is a small one and/ or you do not hold in an ISA or other tax free vehicle because you're not a taxpayer, then any loss due to taxation does not apply.
Extract from the company circular dated 26th January
The effect of the Share Consolidation will be to reduce the number of Existing Ordinary Shares in issue by approximately the same proportion of market capitalisation returned via the special dividend (for these purposes, the market capitalisation used is that as at market close on 22 January 2021). It is anticipated, therefore, that the market price of each Ordinary Share in the Company should remain at a broadly similar level following the Special Dividend and the Share Consolidation
In other words the dividend will be offset by an equivalent reduction in shares, this will result in NO change to the share price come Monday.
In addition, I hope no one buying recently was thinking they were getting a free lunch by way of the 0.509p dividend.
If you purchased these outside an isa wrapper, don't forget any dividends you recieve over £2000 ( including any from your other investments this tax year) will incur a tax liability which will put you at an instant loss come Monday.