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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.
MOSt Private Investors likely have these in a sipp or isa I would reckon by a substantial margin
with price dropping like it is I am going for dividend and hoping in short term price will creep up to £3.00 .
IAPR...you wont be better off or even . because If you take your cash invested 36,000.and divide it by your new reduced holding of 11,842 your break even is up to £3.04... therefore your shares are sitting at a loss , presuming price is £2.40 per share .9as per your calc)
gg
that’s how I see it. Despite them being loss making they were sold at a profit. Getting a little tiresome now but anyone who thinks a couple of directors have got together and called it a dividend must be naive.
The CFO and city accountants have done their due diligence and have used that term because of legal obligations.
Understood...but how are the institutions looking at this I wonder ?
No wonder the sp is dropping. The penny for PI`s has finally dropped since those not holding shares in an ISA or SIPP are taxed on dividends so for no reason at all they are now faced with an unnecessary tax bill. Where as if TSCO had simply called it "Capital Return" and NOT dividend , it would not be taxed. Shame , but there you are.
No wonder the sp is dropping. The penny for PI`s has finally dropped since those not holding shares in an ISA or SIPP are taxed on dividends so for no reason at all they are now faced with an unnecessary tax bill. Where as if TSCO had simply called it "Capital Return" and NOT dividend , it would not be taxed. Shame , but there you are.
Cheers - although i would think return of capital would be paid out of share capital and share premium account. From Vecturas statement of changes in equity for their return of capital it was out of retained earnings.
I feel like you're getting frustrated... I'm just interested in how it works. My small holding is in tesco is in an ISA anyways.
Was the asian business not sold at a profit of the net assets disposed of?
i’m in that exact situation of 1000 shares.
unsure what to do now, sell before and make a small profit (maybe 150 at current price) or hold and get the £500 but lose 211 shares.
https://financial-dictionary.thefreedictionary.com/capital+dividend