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what a "sweet" nickname , Mags...I like it .My husband is still howling with laughter.
Nutella .. it's a share I don't really understand, bumper christmas and a healthy bank balence and the SP drops .. Easyjet just grounded all flights and their SP rose over 5% ..
The key to this is to look 12 months ahead 20% less shares available 250million less in pension contributions could equal a 30% divi increase per new share the less shares available the harder they become to buy £3 plus by end of year imho gla .
What are all your views on why Tesco share price has not gone up much since announcing the special divi???/ it is after all 20% ish ....I would have expected a surge in SP .Is it because the consolidation has had negative effect ?? or are people waiting to see details in the circular on 25th Jan ??
Mac, if you don't do a tax return currently and have no desire to do one then id sell to bring you under the 2k dividend allowance. Then rebuy once it goes ex divi (assuming you want to continue your Tesco holding, and that this doesn't put you over a cap gains tax threshold).
macaumike
So potentially your tax liability will be on the remainder £2500. For example if you are a basic rate earner then it would be approximately £185
You could also split the shares between a family member by bed and breakfasting half but of course with stamp duty and fess it wouldn't be worth it.
Wouldn't advise any investor to buy or sell but don't forget that the company will be sending out further details about the resolutions to be considered at the General Meeting. We should be getting it sometime next week.
I have 9000 shares not in an ISA.
I wish I'd never heard of the SD, just seems to cause confusion, I've backed of from selling about three times lately as it seemed the price would continue to rise .. hopefully it still will but who can tell ..
@ggplyr
Yes that's right. I think I will have to temporarily change my ISA settings to hold income on account instead of paying me out monthly.
Thanks for your reply.
Thanks
@IAPR
I assume the dividend is paid into your isa wrapper, then you opt for it to paid into your bank account?
If so can you just stop the auto payment to your bank account?
Once it leaves the ISA wrapper if you transfer it back in it will count as a contribution towards the 20k allowance this tax year.
https://www.gov.uk/tax-on-dividends
Tax free dividend allowance is 2k currently.
When companies accompany a special dividend with a share consolidation they say it's to maintain both the share price and EPS on a comparable basis. Until we know the basis of the consolidation it's hard to know what the impact will be, but it's looking like it will be in the region of 4 new shares for every 5 existing shares held. I think the tax implications for shares outside an ISA are the same as any dividend payment.
However, I do have a question:
All my TSCO shares (15,000) are in an ISA which pays out income on a monthly basis to my bank account. So it looks like if I take the £7,500 or so in cash it will effectively dilute the investments I hold within my ISA wrapper.
Presumably I will have to re-invest the special dividend within the ISA before it's paid to my bank to avoid this?
You shouldn't be worse off. You shouldn't be better off either. If you were to be better off then the share price would increase rapidly up until the point you are no better or worse off. If you were to be worse off the share price would go down rapidly until you are no worse off.
It does depend on your holding size though, if the dividend will be over 2k for you and its outside an ISA then yes you'd be worse off than if it was in an ISA.
Depending on whether you have used an ISA this year you can sell outside the ISA and then re-buy within the ISA if you wished.
Whether you sell or hold now really comes down to whether you think tesco is still a good investment for the future.
macaumike
You could ISA wrap them if your expected div is greater than £1000 which is your allowance. If you decide to keep them then your tax liability depends on your tax bracket. Basic-rate is 7.5%
GS has a buy rating today on TSCO btw but good luck if you decide to sell.
I agree with your assessment but the tax situation means we are worse off and we have a smaller shareholding? There must be something I am missing here? Might as well sell now?
Breaking down the questions/comments:
What is the point of paying a 50p dividend- to return cash the company does not need or can not generate a decent return on back to share holders.
Why consolidation the shares- not sure, other than to prop up the share price, i don't actually see any point but then haven't looked in to it in great detail, perhaps because because a reduction in share price doesn't sit well with passive private investors who may pay little attention to anything other than occasional review of the share price.
This is giving our own money back - correct, no different to any dividend. A companies value = assets - liabilities + estimate future earning potential. Any dividend is a cash outflow so a reduction in assets (or at the date of ex divi its an increase in liabilities until the divi is paid)
Tax implication- your dividend is taxable as normal. Normally a share consolidation/split does not have capital gains tax implications because your tax base gets reallocated across how the shares are now split. I assume this is the same. However, the value of your shares is expected to drop once it goes ex divi so i assume you will now carry forward a capital gains tax loss if you sell them. But my personal tax knowledge is limited.
What is the point of paying 50p divi and then consolidating the number of shares by 20%. Just giving us back our own money. What is the tax implication?
If share price is 250p and dividend is 50p i.e. 20%.
Number of shares held will reduce by same percentage so if 1000 held reduced to 800 and share price remains at 250p.
They are looking to hold share price at same level on consolidation.
Hope this helps.
Thank you ....Thats just what I wanted to try and work out ,but my maths /equations are not up to it !!!
So that would mean a 20% reduction in the number of shares I hold ?? ..yes ??
TRB
What I meant when I said that the dividend will rise was that x shares in circulation will result in y pence per share dividend.
Reduce the number of shares in circulation, the same distributable amount will result in a larger y pence per share.
@ redbarron
TSCO took a hit with bringing in Covid screening measures but I’m sure the current lockdown will keep sales robust.
Booker doing very well. Bank not so well.
Also a good saving with the pension costs. Cannot see the yield falling but who knows.
Of course that also depends on your avg. buy price.
Keep it simple s.....
You will all still own the same per- centre share of the company with or without consolidation!
I see he’s doing very well since he jumped ship . I looked back in on a company called eagle eye solutions EYE , only another £11 million shares in his pocket! I nearly picked a few shares up but forgot they’ve trebled in a year,
Now here’s a thought not connected to the special dividend but the actual dividend. Something rosewall made me think of when he said the dividend should rise. Now if I remember Tesco pay 50% of their profit as a dividend which was£2Billion ish last year , now this year they have taken a £820 million hit to their profits . So say they make 10% more 2.2 Billion but you take away costs 800m .that means their will be only £700 million versus £1 billion to pay out as a dividend so I think “ I may be wrong the dividend may fall this year or stay put .