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I noticed a post the other day mentioning dividends. This has always been my play while invested in ggp. I think it is fair to say that this is now looking like a good long term bet for any investors looking for a yearly return, which may only be a few years hence. I for one can't wait to see a revised m.r.e and more speculation around that regarding possible dividends.
Yes, I certainly don’t think talk of potential dividends in the future could be classed as pie in the sky anymore.
I've never understood the UK's obsession with divis. Not only are they significantly less tax efficient than capital gains, but I always feel that you'd see greater overall returns if that profit were reinvested into the company for growth, like the yanks do. Given that their two major indices have nearly tripled since last century, while ours is pathetically flat over the same period, I've always wondered if we're doing it wrong. So for a company like GGP, I'd much rather they kept the profit and put it into expansion and growth. I'd prefer see my divi in the SP please. Personal view of course! :)
How much per share would the dividends be? <10p?
''Not only are they significantly less tax efficient than capital gains''
Depends where your investment is held.
With mine in an ISA a potential divi of 5p annually would give me a tax free annual income of £100k (which is more than enough to provide my whole family with a very comfortable standard of living! (Heck, I'd even be happy with half of that!)
Zmac99
It depends upon your calculations. Much is up in the air at the moment still,but i keep coming up with 5p. I think 10p will depend on success other than haverion.
Thanks Chrisatbirdies.
For a company like GGP, at this point in their 'life', would profits not be better re-invested, ensuring we have full ownership of future mining locations?
@Bunky1981 - Possibly I am misreading your post. Are you suggesting that American companies do not pay dividends to their shareholders?
less tax efficient! Get a new accountant/adviser.
Tax rate on divis (after allowance) is LESS than your normal tax rate, and LESS than what you pay for capital gains.
You do need to look at the tax system in its entirety, not just a blinkered view of one bit!
Hi Bunky. I am with you on divis. When receiving divis the co is just giving you your own money back. If the co does not need the money for expansion diminishing returns should make you reassess your investment. ATB Speedy
@WelshFalcon - huh? CGT is 20% compared to Divis are 32.5% or 38.1%. That's a massive saving if you have CGT instead of divis. Not to mention that the personal allowance for CGT is £12.3k compared to a very modest £2k on divis. So the first £24.6k per year is tax free on CGT for a married couple anyway. CGT is by far the better option.... even for most basic rate tax payers where it's 7.5% vs 10% because the CGT isn't payable on the first £24.6k, whereas you'll be paying 7.5% on on £20k of that £24k giving you an avoidable £1.5k tax bill... if it were gains rather than divis. I think my adviser has is spot on, no?
@Sojourner - they do. I just feel that there's just a better growth culture there, than here. We're obsessed with divis. And I don't know why. If I want some of my profit to come out of a company, then why not just sell some of the shares. It's the same thing, but more tax efficient in almost every case. If you look for equity income funds, you'll find lots of the top hitters are UK-centric funds.
@Mattyboy - well obviously the tax comparison is only relevant if you're in a taxable wrapper. But what's the difference between a 3% divi as opposed to 3% growth? You could have £1m in stock that pays a £30k divi, or you could just not distribute that profit to shareholders and the stock would be worth £1.03m instead at which point you can sell the £30k for the same outcome?
@speedy - exactly. agreed.
Do stop criticising divis. They serve a whole range of purposes, keep the nations pension funds paying out ( if you are lucky ) , JUST MAKE SURE YOUR INVESTMENTS ARE isa'D, and what is wrong with getting good lumps of cash back. Re-invest it, buy the wife a new dress, have a good holiday, stick it in your kids isa,
Relax ...patience.
Tig
Hi Chrisatbirdies, without sounding too personal...are you by any chance a Canaries fan?
@ Bunky1981
Yes, but surely if you sell, then those shares are then gone and any future increase in sp will be lost.
If you get a divi, then okay the value of the shares at that point may be less but at least you still own the same number of shares (that you would have sold in the first scenario) so any future increase in value (for whatever reason - say 'left field' suprise positive news or a takeover offer) wouldn't be lost? (Unless I'm missing something?!)
I used to work for the UK partner of a US company that kept to the no divi mantra. They eventually went bust, I made a fair amount of cash as an expert witness as the tribunals/court cases went through.
When they were small, growing at their target 20% year on year was possible. Employee and director share options did very well. The problem came as they grew larger. Past director share incentives were likely to be unmatched without this level of growth, so they fixated on shorter and shorter term 'fixes' to show their much touted 20% growth.
They ended up understaffed (due to desperate measures to 'contain' costs), were unable to pay the going rate for good people with consequent drop offs in performance. Things got missed and a handful of directors did a few dodgy deals with finance and cashflows. Massive implosion, court cases, the company is no longer.
When starting out and in early years, yes - reinvesting profits can be good. But you get to a point where you don't need/shouldn't invest more in growth (baby steps needed for a long life - running too fast will cause falls). This is when you start to pay dividends and keep your growth controllable. Funding can come, very often, much cheaper with loan notes etc. which is of greater benefit to shareholders.
A well planned and well funded growth is a better long term plan than going for broke without giving divis.
@WelshFalcon - I was right about CGT being preferable to Divi tax though, wasn't I?
@Matty - Divis vs gains is (almost) purely down to whether you want profits paid out to you, or reinvested to increase the value of your stock. The flip side would be that if they do start paying a divi, I'd just use it to buy more stock... because I'm a growth investor, not an income investor. I don't want the money paid out. I'm still young-ish and earning a wage, so more income isn't of interest to me. However if they do pay a divi, I'd have to pay 38.1% divi tax (or 19% Corporation Tax as I also hold a lump of GGP via a Ltd company) on that before reinvesting it straight back into more GGP stock. So for every £100 of divi, I'm only going to get £62 of new stock. So I'd rather they didn't pay out the divi at all, kept that £100 in the company, and I'd (theoretically) see that £100 going into the SP instead, which is gross of tax. I then get rolled up growth, which leads to much higher overall growth. It's just a personal preference.
@Tig - I wasn't criticising divis per se. More that (as I feel is actually being evidenced in this thread) we have a cultural thing for dividends. There's something about getting paid a bit of cash every 6 months that makes us feel like we're winning. Even though it is just our own money being paid to us. I see it at work all the time. Typically with the older generations. They pass away leaving behind a box of utility company (and similar) share certificates because it "paid a good dividend". What they failed to ever look at was the miserable overall return they got for the last 40 years because they obsessed about divis. Where growth investors have made multiple higher returns, in what is now also now a significantly more preferential tax environment for gains. The same people that jump and down when they get £50 "for free" from their premium bonds, even though they don't realise that they've held an asset for 10 years with an annual return of about 1%. Meanwhile the MSCI world index is up 10% per year over the same period. That's all I was saying. I'm not... ante dividends (see what I did there). ps. As for the nations pension funds paying out. That's a perfect example of what I find so depressing about the FTSE. That they are all basically just owned by pension/investment funds, and rather than our 100 biggest companies actually growing and expanding each year to acquire, grow and develop on the global stage, they have a bunch of pension trustees march into the board room each year and bleed them dry for a divi, in exchange for not dumping their stock, to save their own skins. It's just my personal opinion on a conversation about dividends :)
Bunky/Speedy, re divis I totally agree with you and have commented on this fallacy so many times before. If you want a divi just take the 'natural' divi by selling some shares. And Mattyboy, are you missing something, yes you are. On a before tax basis (or no tax basis) a natural divi is the same as the a corporate divi. After tax basis it depends on your tax position....
One other point; do you think that GGP can use the money better than you can? I do and they have done so far.
Jerry , most respectfully, and as a humble investor who has always admired your advice, I donot want any fisticuffs when we meet next week.
But when, at the end of the year when Scally is inferred 4 times larger than Have , and we sell off Tasmania, and Panorama exhibits multi millions of tons of cobalt , and Rio storm in with a few £££ billion buyouts of some of our assets,......... I will be happy to take a special divi of say 10p or 15p a share, and lett GGP march on with their next half dozen prospects.
Tig
Does anyone think there’s someone selling considerable amounts of shares off to drag this down? Golds up, good company, good prospects, rapid advancement but yet it continues very slowly to drift back. I thought I had done well to buy today at 20.60 . Just goes to show.
Gold reaching out for $1860. Hoping it hits it soon.
Red SP won't last too long
Tigger, certainly no fisticuffs from me!
I think in your scenario the company would either be awash with cash and so a special divi would be in order, or with all those discoveries it would need a pile of cash to develop them, so a rights issue would be more likely than a divi.
Looking forward to Wednesday week.
Bellers lth’s slicing off the top for mtr maybe ha ha
Bellers the illusion that its "drifting back" is just that, an illusion, truth is we were at this price over a month ago, on 16th Feb. but the tactic seems to be one/two day rise followed by a week or more of small red days, to give the illusion we are falling, when actually we are consolidating, imo before a substantial rise.
games games games.
sorry, 3 months ago we've been at this price (not dropping)
somehow i lost 2 months of my life lmao!
Definitely the most plausible answer Bellers, bought another 100k+ @ 20.7 today as well.
GLA