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You are right and I agree with you working however I am going to have to pay tax on my dividend and in the end unless I invest the dividend to bring up my holding to what I had before consolidation and pay fees to do so I will remain with less shares.
sorry should be makes 1919 plus two bits donated to charity (even confuse myself!!!!!)
Thanks Lupo. Yes, I'm aware of the [potential] dividend tax implications - I pointed this out in my very first posting on this board (and in fact my first ever on "LSE"!) about a month ago. In my case I will be hit with the income tax on dividends but luckily only 7.5% (I'm recently retired) and only on about half the TSCO dividend (without this particular dividend I'd have been way below the £2,000 threshold this year because so many of my other dividends have been scrapped or reduced or deferred). It is certainly not a pretty picture for higher-rate taxpayers to be hit with 32.5% on this - in effect being taxed to stand still! Plus there's the loss of a fraction of a share in the consolidation if one didn't start with a multiple of 19 (or, in my case, dealing costs to adjust one's "pre" holding to get it to be a multiple of 19). Furthermore presumably Tesco have to pay fees for the admin work of effecting the consolidation etc - cash going out of the company.
Regards,
Mike.
Figured it out early this morning 2417 gets 1908 plus .15 (a bit) 15 shares gets 11.86 (a bit) knock 9off the two bits which go to charity makes 1912 plus two bits . Which charity have I donated to?
We may not have lost out as a result of this SD (yet).
But certainly haven’t gained anything. The Board have used a significant amount of money to correct problems of their making but rewarded shareholders with nothing. This Board will have a long way to go to retain the confidence of current and future shareholders in my opinion.
Boy,am i getting bored with this
Sorry Mike to butt in. I know your question is directed to bluerose. You make a valid point and I believe you are right if either your funds are in an ISA or your divi stays under £2000, including other divis you might receive this fiscal year. It is only If you end up paying a more than a third of your divi in tax, the argument changes.
bluerose,
I hope you will see my response in the spirit of trying to be helpful.
I don't see how you think we've lost out. To illustrate with an example.
Last Friday let's say you had 190 "old" Tesco shares. The market price was about £2-40.
Therefore you had £456.
Today you will have 150 "new" Tesco shares. The market price is about £2-45.
That's £367-50.
You also have a dividend of 50.93p to come (payable on 26 Feb) on the 190 old shares.
That's £96-76.
So now you have £464-26.
In what way do you think you've lost out?
Rgds, Mike.
“I'm fed up with so many people who do not know the simplest of basics. I suggest to these people, learn a bit or stick with cash.”
Lti - I am fully conversant with how dividends work but the point I made in my original post was clear. I answered atanasoff’s question and explained that the total value of is holding plus the special dividend resulted in a net gain but because the consolidation of shares recalculated the avg cost per share paid it shows as a loss on his portfolio even when the special dividend is reinvested. It’s just because of the way his portfolio is displayed by his provider using a average cost per share paid.
By all means get fed up with people who don’t know the simplest of basics mate but instead of just telling people they are stupid perhaps you could try to answer their question in a way that they understand. Thankfully atanasoff’ did understand my response.
p69
''but his portfolio will still show it as a 10% loss.''
If someone bought 10,000 shares in a company at 110p per share the day before it was going xd with a dividend payment of 10p, I think you will find that on xd day the portfolio will show a loss.
I'm fed up with so many people who do not know the simplest of basics. I suggest to these people, learn a bit or stick with cash.
Not forgetting any fees for reinvesting. I had thought about buying Tesco shares from the "SD" but add about half a % investing fees and this deal seems even less of a "windfall"
I feel that we were short changed by management. Like it or not we have to pay tax on this dividend and ended up with less shares . If we had to add up the dividend to the share price as is we are still short of the price before consolidation . We lost out on both fronts
samson123,
I'm with II as well, and they got mine exactly right. In fact, a week or so before the div/consolidation I topped-up my holding of Tesco for that very purpose (ie to slightly increase my holding to part-way compensate for the forthcoming reduction, but also to ensure that I had a multiple of 19 so as to avoid losing a fractional entitlement). On the face of it, they've got yours wrong and you need to query this with them, but:-
(i) I assume your 2432 were all in one account, not spread across trading account, ISA, SIPP or whatever, and
(ii) I wonder whether because you bought the extra shares as recently as Friday this was past some administrative deadline. I don't remember II stating a deadline explicitly in their corporate action notice, but I did see other posters on this board, last week, mentioning deadlines from their own brokers such as 16:00 on Thursday (or Friday?).
Not sure how much help that will be to you.
Regards, Mike.
RW
I did say what I am classing it as ,rather than what HMRC would say it is.
It is clearly not income derived from the operational business, it comes from an asset sale.
In the US, more often than not a special dividend would be used as a means to 'return capital' , but can be specified by the company as being a 'capital gain ' or 'income'.
Unfortunately Tesco have not set up a 'B' share scheme which would have been appropriate in this case, so as to give the investors a choice to have the proceeds as a return of capital.
So it is a conflict between what HMRC may see it as and what morally it really is.
I would contest the paying of income tax on what I see as not being income.
I certainly haven't paid income tax on similar returns from asset sales, but they may have (can't remember) all had a 'B' share schemes.
I had 2417 Tesco shares before consolidation so I bought 15 more on Friday giving a total of 2432.If the consolidation is divide by 19 and multiply by 15 I thought that would be exactly 1920 new shares . My account (with ii) has only been credited with 1919 shares. Have I got the maths right before I contact them? I bought the extra shares to avoid losing the odd bit which was not a whole share.
Mpw: TBH I didn't do forums then, when NGrid did their SDplus consolidation in 2018 (?) (incidentally it was combined with a final dividend so had less financial promise than Tescos additional SD and separate final divi due in early July 21).
For what it worth to worried Tesco investors here, the N Grid consolidation didn't fully materialise in an "upheld" share price, and reduced holding stayed in negative territory to this day, though not overtly so ( about 12% down). But it has held up nicely compared to other shares during the covid of 2020. ( defensive share as is Tesco). So I shrugged and took the 4 to 5 % divi. So I' probably fair ahead on absolute £££ now. But NGrid is a utility- you accept that - accumulation of dividends rather than capital gain. Tesco is supposed to be much different. Dynamic and fighting it's way with the Lidls and Aldo's - and it succeeds. To wit its market share and increasing covid driven online sales. Aldi and Lidl do not do online which is a massive advantage for Tesco particularly in Covid times. So maybe Tesco v N Grid is not a comparable situation. The lesson for me was "always scrutinise SD/ consolidation very carefully. They are very different from stand alone special dividends based on exceptionally good profits.......
I don't often disagree with LTI (ducking and dodging a lightning bolt :-) ) but I still don't see this as being a return of capital. Firstly, Tesco has shaped this in such a way as to meet the HMRC rules. On this, given their track record, Tesco will have crossed Ts and dotted Is with the agreement of HMRC. No way will they push boundaries with this. Secondly, think about it. The special dividend comprises two parts. The capital element, a portion of the NAV for the two businesses and the profit element, the amount of money that was paid over and above the value of the asset. The profit element, which was detailed in the original circular, should surely be treated as a dividend in the usual sense of the word.
For once, I was disappointed with the gov.uk web site. It doesn't mention SIPPs as being a tax wrapper for dividends. Neither could I find the term Special Dividend or Return of Capital in this context.
EQ
I shall repeat my reply to your 14.07 post. Let me know what you don't like about it.
eq
''Longtimeinvestor - looking at the sp over the last few years, when was the 51p added in value to it? ''
The value from the Asian asset sale was incorporated into the Tesco market cap.The share price has not reached near 300p in recent times. I had earmarked to sell some shares at 270p which it also hadn't reached. You may be looking at a graph that has been put out by the return/consolidation as per the link showing the share price at over 300p just a couple of weeks ago.
https://uk.finance.yahoo.com/quote/TSCO.L?p=TSCO.L&.tsrc=fin-srch
The Tesco share price has held up well since the start of the Covid 19 market sell off mainly due to the asset sale and what was to be done with the proceeds.
Eq
If you don't like an answer to your 14.07 post, which obviously has embarrassed you by exposing the inaccuracies contained within it ,then that is something you need to deal with , rather than try and deflect away from the issue. If you are going to post then try for it not to have flaws.
Agreed Equilibrium although I learn a lot from LTINV whether its good or bad. Hes probably a bit miffed over the reduction in his share holding as we all are. It would have been nice to have the SD as a "free dollop" and taxation free, but we may have paid for it via a huge drop in Tescos share price as is usual just after payment of divis.
As it happens, and onward improvement the share price has held up well so far and is "promising" a rise, given the potential for a very good final years results.
Ade - I suspect a fair few shareholders will unwittingly go over the £2000 tax free dividend allowance. It was previously £5000 before the then chancellor Philip Hammond pared it down ruthlessly after many invested large sums based on the assumption the then £5000 was likely to be permanent.
That oversight on the possibilty of exceeding the allowance will be despite the lowering in dividend income due to the Covid crisis. About half the firms Im invested in (about 6 companies) cancelled their divis completely and have so far mentioned nothing about when they are likely to resume eg Taylor Wimpey,Redrow (though Persimmon had a sizeable divi)
The huge Tesco SD is illustrative of the swings and roundabouts that is inherent share investment for income. Alrhough to be fair there have been a fair few opportunities for capital gains when the market was at its bottom last year eg Royal Mail, Royal Dutch Shell.
Prussell - "smaller shares held will see smaller divi paid"????
EPS rise should result in higher divi paid even if divi held at previous years final ?
Fluffy - next divi to be announced after final results announced for year end 28.02.21 (qualification date) will be in late May and paid in July - following pattern of last financial year. Natually its the QD to aim for - you still get the divi if you sell between that date and actual payment date.
Sorry, that was supposed to be a 'smiley face' at the end not '??'.
ECRyder, on the contrary. I just had a look at some NG posts around that time and the tone/content is pretty similar ??
Glad to see posts moving forward to position after Spec Divi situation. for future dividend, it is the "pot" which needs to be increased or maintained. By doing so, smaller no. of shares sharing will see increased divi per share. If the divi ammount is maintained, perhaps with a small increase then the smaller shares held will see smaller divi paid. So again, care on dividend position. TSCO will need to declare the dividend pot being paid out. If it offers a value per share then taking away 23% of everyones holding will need to see the div increase by same amount to stand still. Personally I dont see dividend increase showing 25%. Overall, it seems most see this as a disappointing result, and I am one of them. I know my numbers and see potential future benefit, but I didnt get the spec divi in cash when you factor in tyhe consolidation, nobody did, so all in all happiness scale shows 5/10. Like my school reports said " must try harder" & "could do better" which is how I see this issue on behalf of TSCO .......