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Here's the dilema: original purchase 2550 shares at 220p = £5610 outgoing. This is my breakeven / profit level. Going forward shows 2557 shares becomes 2013 shares x 247p (todays price) = £4972 + £1300 special divi (2550 x51p) = £6272 - £5610 = £662 profit with Spec divi, or if I sell 2550 at todays price of 247p = £6298. Profit £688. So against todays price which Tesco Board want to maintain hence the consolidation, in reality I dont get a spec divi of £1300 I( get either a profit of £662 or £688.
I am sure many others will have similar calculations and wonder why the kerfuffle of spec divi which does seem to have given with one hand and the consolidation has taken it all with the other????? So why bother, why not simply use the money to paydown more debt and pension defecit etc. I thought "at last, a bloody share win" when I looked to get £1300 in the pocket. Should have known it was never going to be that straight forward....... "The Lord Giveth and,".... well you know the rest!!
I cannot be bothered to sell for £26 differential as £12.99 will be taken in dealing fee, so difference is £13. Will hold on and see if I get another 7p Final divi for 2020 which I believe is payable in July 2021, anyone know if this is correct?
if everything else remained equal in your calculations would the share price not go up by x 19/15?
lets make this easy and not 15/19 shares.if a company has 1 million shares and worth |£1 million. and the turn 2 shares into 1. so you then get 500,000 new shares at £2.the company is still worth a million. how the f..... you think they go down i just dont know.
And that puts the share price after consolidation at about 313p based on todays of 247p. And that's why I have bought TSCO, and as long the share starts trading above 247p I have not lost anything . JJ
Prussell1963.... you are correct in your calculations, don’t forget however that you may be liable for tax on dividends received. Currently zero rate upto £2k, but if you go over that threshold the rate moves upto 7% and if you move into the higher rate it’s 32.5% tax.
Retaining the shares in a normal share trade account is fine if you won’t cross the £2k tax rate- that’s all dividends through the year btw..
I’m no tax advisor..... I’m just someone who pays tax!
Gl with your money
Well said!! ?? Tesco have said that they don't expect the SP to alter!!! Let's hope that they are correct, after all, this is extra cash coming from another source!! ?????? let's hope!! ??
JJ, surely after consolidtion you WOULD (excuse capitals) expect to be better poisitioned by the amount of the spec divi per share. I would hate to see that the share price stays the same circa 247p as surely with less shares in circulation x share price the capitalisation of the company is less.? I had hoped to see a clear benefit delivered with the spec divi (£1300 in my case) but this will not be the case after consolidation. I will have fewer shares (by approx 537 shares which equates to £1326) . TSCO Board has already said they dont expect share price to change and I assusme they mean reduce on ex dividend basis (51p). So my £1300 thank you dividend has been clawed back by reducing my shares. This would have been fine if the apitalisation had increased share price (fewer shares covering the same business value gives increased price per remaining share). This only works favourably if the sp does increase sugnificantly quickly to reflect better value based on above, but this wont happen. I think a sell off after spec divi as owners see the spec divi doesnt actually deliver and share price will come under pressure, especially as those who purchased at sub 240p (seemingly the magic number) take their spec divi and sell their remaining holdings, as we dont actually get 51.3p of value when consolidation is taken into account. Smoke and mirrors and slight of hand definately come to mind. I am assuming that the institutional investors have a view, but cannot find out what it is!!
Posters keep stating that the dividend policy will be more generous as less shares to spread amongst. That is NOT the case. The dividend pot is defined in terms of an amount, eg xyz Billion. That is then divided by the number of shares but whilst the amount per share is higher after consolidation, remember you now have 15/19 shares so receive the higher amount on less shares, net result = EXACTLY SAME.
It does have the effect of making the yield look higher so we may go from 4% to 5.5% but that's a reason to not increase the dividend in future, yield already high enough. It will also look attractive to new purchasers and be good for raising capital in future fund raising offerings . In short, it's good for TSCO but of little/no benefit to PI's.
Reader
I have yet to see anyone post that the Tesco dividend policy will be more generous. No one has said that, that is the subject of an RNS. All that has been said is that the dividend pot will be shared between a fewer number of shares.
EPS improved too with less shares in circulation. Just a thought in relation to institutions. Schroders are moving out of MRW but there has been no holdings RNS from TSCO. You can only assume they are content with their investment here. Surely, if this SD was unfavourable to them you would have expected the opposite. Especially when MRW have slightly increased market share.
prussell1963, as I see it today I have 1000 shares and own X% of TSCO, and after consolidation I will have 789 shares but I will still own X% of the Company. In valuing the Company today perhaps we should look upon the SD fund as a debt which TSCO has to clear, with the monies being ring-fenced and set to one side; and so importantly it is ignored by the 'markets' when pricing the shares today/tomorrow. In due course the SD is paid out, the value of TSCO has NOT altered, hence my 789 shares will I've calculated be priced at around 313p( still allowing me to own X%). Lets hope I'm right. JJ
P.S. Buy now if my view makes sense-THIS IS NOT ADVICE-good luck all.
Lost ....
No better no worse .....what kind of statement is that !!
Special divi sharing spoils and no better no worse ?
Shouldn’t have bothered then maybe....
Really ?
Hi jimjam, et al,
As a holder of Tesco shares myself I very much hope that you're right and that early next week the price of the ("new") Tesco shares is about £3-13, but sadly I think that will *not* be the case, and, everything else being equal, the price of the new shares will be very similar to the current price of the existing shares. My own reading of Tesco's literature and announcements is that the whole exercise has been designed to result in the "before" and the "after" share price being about the same. However, because the dividend value (per share) is fixed whereas the share price itself moves in the market, the "before" and the "after" share prices can only be the same with one value of starting share price, and I think that is £2-42.
I have put together a complicated spreadsheet that works out what the "after" price would have to be for any given "before" price for the individual not to lose out, and the results are interesting. At £2-42, the "before" and the "after" price are the same, but the higher the "starting" share price, the higher still the "after" price would have to be so that one didn't lose out. I will re-check my formulae in the morning (I'm very tired now!) but the results for the "before" and the "after" price to maintain the same total value (including the special dividend) are, for now, as follows ("before" is on the left, and the necessary "after" is on the right):-
£2-20 / £2-14;
£2-30 / £2-27;
£2-35 / £2-33;
£2-40 / £2-39;
£2-42 / £2-42;
£2-45 / £2-46;
£2-50 / £2-52;
£2-55 / £2-58;
£2-60 / £2-65;
£2-70 / £2-77;
£2-80 / £2-90.
Of course the Tesco share price doesn't operate in a vacuum, and a lot could happen between now and next week!
Good luck all.
Mike.
jj
''In due course the SD is paid out, the value of TSCO has NOT altered, hence my 789 shares will I've calculated be priced at around 313p''
The current market cap of Tesco takes into consideration the Billions of pounds sitting there ready to be returned to shareholders. When the capital is returned via the special payment the
assets of Tesco will be reduced by that amount.
You will only get an increasing share price after consolidation from buying demand/ market rerate .
Rosy I’m sure I said with less shares in the market the dividend would rise to 20% as let’s say they made 2 billion, 1 billion they give to shareholders which was 9.21p last year so if they made 2 billion again ( we will have to see as there’s the cost of covid to come out unless they put that under another sticker of course) so 20% less shares I wouldn’t be surprised if the dividend is 11.5-12p for the year actually making a nice 4% if I may say so ,