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Prospecting
Surely with the spread and dealing charge would it really be worth it? Any gains is going to charity so I won’t be too bothered.
That’s true, and an important point if you don’t have a multiple of 19 you lose out. So either buy to get a multiple of 19 or bail before the consolidation. DYOR and calculations of course. Sold at close today, just too many unknowns for me. Happy with profit.
Thanks leas I have read your message on the other board & value your opinion. It also seems that HL are tipping this share although I'm unsure whether this is a good or bad thing based on their history.
prussell1963,
I don't follow some of your maths. If you have 2550 current shares, and it's a 15 for 19 consolidation, then my calculation suggests you'll instead have 2,013 "new" shares. Where did you get 1,974 shares from?
With the 50.93p special dividend, on your current shares, that's indeed £1,298-71 (or "approx £1,300" as you say).
Sorry if I've missed something.
Mike.
So are TSCO using the specdivi to stop a major sell off after banking it?. Looking at IAPR calcs below which are similar to my own, it seems clear that the specdivi benefit is actually swallowed up by the reduction in shares for most. I purchased 2550 shares at total cost of £5620 (220p per share) based on my revised holding I will see 1974 shares plus approx £1300 specdiv which at current price of 240p = £4740 + 1300 = £6037 (divded by 1974 = 304p per share value to get my £6k back.
this now begs the question is it worth holding for the divi and lower share holding or sell at highest point, giving up the specdivi and be happy with the 20p per share I have made?? Do i think TSCO will ramp quickly to £3 per share to make effectively re-instate the sepcdivi value....... not sure.....
Seems that TSCO have given with one hand and taken with the other !!!
Totally. I imagine the price will hover around here. Anybody buying above 240 and holding for the divi will lose, plain and simple. Dips below 240 however are attractive opportunities......
Gary
You have a cast iron guarantee that you will return a profit. If that village idiot on the LLOY bb advises you to invest there because TSCO are overvalued then based on his usual history of getting things wrong you can sleep easily.
Then again a broken clock tells the correct time twice a day. Good luck in any case wherever you choose to invest your hard earned cash.
I am not a holder of TSCO although I hope to be fairly soon. Thanks to all those that have posted today to clarify the position on the so called special dividend, with opinions that less than £2.40 is the price to buy at. I never put more than £5K into any one single share (I do funds but not shares) so for me if it gets below 2.40 by the Feb cut off date it'll be 1995 shares being brought (7 x 285). GLA
8 billion shares left after consolidation snap em up now while they are cheap.
Special divi aside we have left the eu and we are all still eating well no drama Tesco doing well great share to be in if you look beyond all this special divi drama roll on 3 quid plus this time next year.
I suspect the move back towards 2.40 is the yanks waking up and agreeing with you
"By my calculation anything below 240 is a buying opportunity in an isa prior to divi date."
Exactly right. This practically values the SP to around 240p and should anchor it until the split.
Any price significantly below 239 is a buy IMO.
The big assumption here is that the market cap stays the same:
But EG.
£24000 invested at 240p means I have 10,000 old shares.
Special Dividend = £5000 (50p a share)
15:19 split means holding becomes 7894 shares.
Investment 24000 - 5000 = 19000 / 7894 = 240p
If the Market Cap goes down 15% (loss of the Asian Profits) keeping the same Yield. The the new SP could end up as 204p.
The profitability of Tesco is on the rise, so IMO they will be looking to increase the yield moving forward, keeping the SP greater than 240p after results and next dividend announcement.
By re-investing the dividend, the loss is cancelled out and long term, especially with profits and dividends as they currently stand, dividend re-investment makes this a solid buy, especially under 240.
Spindler
Difficult to determine today when the sp range is not as tight today. Usually by 5.30 the institutional size trades have been published. Last week I can confidently say they were buys.
As for possibility of increasing the yield I’m assuming profits will be bigger this year with lockdowns.
Always a possibility of buying back their own outstanding shares as mentioned in the RNS
Good day for Institutions to mop lots of small trades from weak hands jumping out before they show their hand ? Just a thought
Actually when I looked TSCO was down 1.18 with the market down 1.18 as well so they are pretty much tracking the same
You make some good points MikeM14...slip overall on the FTSE 100 and also going forwards less shares should mean higher dividends and the trajectory was already upwards on the dividends. There will no longer need to be funds diverted to Pension after the deficit payment and add the stellar year they have just had that is continuing. One of the few companies on the London Market that has been able not only to trade but to make hay
Post SD what about further lift under Tesco's wings as reinvestment of SD goes back into Tesco ?
Leas,
Thanks for your kind words, and your own comments.
The only bit I'm not too sure about is "The yield may be increased to reflect the consolidation". I guess if the overall company is making "x" profits, and these are larger going forwards because it's relinquished a couple of loss-making businesses, it can afford to pay a bigger overall dividend (in £ terms) and that dividend now gets divided by a smaller number of shares, so the dividend per share could be higher and thence the yield. And this with a smaller pension deficit to service. How much all this good news is already reflected in the share price only time will tell.
Mike.
Mike
Thank you for sharing your thoughts and taking the time to post them.
Pretty much sums it up and of course every investor has a different financial position that will ultimately decide on how to proceed.
All this chat about today’s news is overshadowing the positives and some investors may be spooked into selling. TSCO have sold 2 loss making businesses, paid some cash into the Pension pot and reduced running costs of it. EPS will be better which should attract more institutional investors with many having annuity payments to honour.
Free float reduced.
The yield may be increased to reflect the consolidation and as proposed today the option to buy their own shares.
I could go on about the fragile wider over priced markets and savers that will be looking elsewhere to get an income from their cash as negative interest rates loom.
Spindler
Most PIs certainly. Most colleagues in Eqiniti , well that is a different matter
Sold the lot £20k, had expected better on divi, made a descent profit. Onwards and upwards.
Hi all,
It's my first-ever post on LSE, so please be kind!
As a reasonably long-term holder of Tesco shares I've read today's RNS, and most of today's posts about it. Most of my comments are from first principles so am open to being corrected if/where I'm wrong. Firstly, what's right or wrong for any individual investor will depend not only on the "before" and "after" share price, but also on their own tax position.
The Tesco share price cannot be totally detached from the broader market. As I write this, the FTSE is down some 22 points (0.3%), which must be a contribution to this morning's slight fall in Tesco. Secondly, the *effect* of what they're doing is a capital reduction, whereas the *mechanism* in this case is a Special Dividend. Thirdly, the trading performance of Tesco in terms of revenue, profit, etc, and therefore its total value, is, as I see it, not affected by whether it has a large number of "small" shares or a smaller number of "bigger" shares. However, presumably doing the consolidation involves Tesco paying someone (investment bank?) a fee, which of course is then money going out of Tesco and being lost to shareholders. To what benefit?
Ultimately no-one can predict exactly what the share price will be immediately before these transactions (Special Dividend and then Consolidation), or immediately after them.
How beneficial, or otherwise, this will all be to any individual shareholder will probably depend on his/her tax situation. In my own case, the large dividend will push the dividends this tax year above the dividend threshold (from memory £2,000) where otherwise it would have been below it (as, this year, so many of my other dividends have been reduced or scrapped). So I will have to pay income tax (7%, from memory) on some of my dividend. If it had been done by other means, I wouldn't have had to pay any tax because this year I'm way below the CGT threshold. Another consideration, which becomes slightly less trivial the smaller one's holding is, is that unless you start with a multiple of 285 "old" shares (15 x 19) you will not end up with an exact number of "new" shares after the consolidation, so you will lose a fraction of a share (the value of all these, Tesco says, will end up going to charity).
I hope I haven't confused things further for anyone!
Mike.
What a confusing load of nonsense, share holders should vote against this ..
By my calculation anything below 240 is a buying opportunity in an isa prior to divi date.
Nigella... Theoretically if I leave the special dividend cash on account in my ISA and share price is exactly the same post-consolidation (240p) my ISA value will be £60 higher. However, in practice, you're right because my intention at the moment is to use the special dividend to restore my original holding and I'll have to pay stamp duty and commission on this transaction.
Not forgetting that approx 4000 shares will not be taxed if you have not used up your annual dividend allowance.