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There is for new investors just experiencing the understandable confusion over a give on one hand - and take with the other. Something Government practices when determining budgets. The natural thought would be to wonder whether the imminent final results and subsequent final ( larger than interim) dividend will defray any losses on the SD /Consolidation action. When I started investing in shares, I thought I'd got a pretty god grasp of it - UNTIL I came across an SD/ consolidation on one of my investments and it was brain bummer fully understanding it. I came eventually to the conclusion that it was the opposite of a rights issue, which effectively dilutes shares with an inevitable reduction in share price. Maybe that's the way to look at SD/ consolidations in a clearer light?
Norrab: I'm with you on that.
That is despite the embarrassment Tesco have given its shareholders with its double charging of customers paying by card at the till. (Argument currently raging on Money Supermarket) And it's unnecessary delay in refunding those affected in these Covid related financially strained times! It gives a terrible image to loyal customers of which I am one naturally as I hold shares.
I'm dead against the current movement to a cashless society with cash points closing down. Doubtless it's Government encouraged.
If there ever was a big illustration of the imperfections of paper recorded transactions, then this scandal would be it. Add to that the certainty you will never get a loophole free card payment system for the fraudsters, I'm sticking to cash for Tesco payments. They can not ask me for it twice once I've exited the store, and if they did, that's the last time they would see me as a customer. I'd be down the road to the nearby Aldi or Lidl. Take note Tesco!!
Just to make it clear to relatively new investors - If a company pays a dividend (special, ordinary or final or even quarterly) then the share price would ordinarily drop on ex dividend date. The day before ex dividend date is the qualificatiob date which is the last day you have a chance to a right tp the dividend.
The share price does not drop after "payment date" because the adjustment downwards in market capitalisation has already taken place on the earlier ex dividend date.
The downwards adjustment in share price occurs in the case of NO consolidation. Normally special dividends do not involve share consolidations. But this is not the case with this Tescos SD - so no reduction in share price.
As others have said. the share price could well rise if enough Tesco shareholders want to reinvest their SD to maintain the level of their pre consolidation holding.
I hope this makes it additionally clear for our newer investors who have not experienced the rarely occuring SD/ consolidation issue previously.
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.......
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.
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.
FT 100 index showing a steady rise today heading near to 200 points higher. Its all good news.
BTW I can not remember the National Grid divi/consolidation , a couple of years back, ever attracting this level of interest/confusion/share chat/controversy.
as we speak.....! (All things being equal) As for reinvestment of SD in Tesco,i a buyback/consolidation is effectively Tesco compelling shareholders to choose Tesco as the preferred choice company for reinvesting the proceeds to maintain their pre SD/ consolidation value of Tesco stock. You could reinvest the SD proceeds in Unilever at the moment and possibly be better off.
Re Divi tax : If youre in an ISA or SIPP you will not get taxed. Neither will you if you are a non tax payer such as say a pensioner not liable for basic rate tav, but I guess those are few and far berween lol
Roll on final results and dividend announcment.
Hargreaves Tesco data factsheet is showing a circa 0.53p rise at 22% on Fridays close! Seems they are working on a theoretical 1.88 pre consolidation assumption. The brokers seem to be treating it differently according to how they see the SD/ O'Neil issue. Not that it matters. It's all the same in the end lol
Contago
Im resting easy without going to the bother of searching out data to confirm. Thats shows my confidence in a quality share thats almost certain to rise back to previous levels as Covid retreats. Dont Deutsche Bank have a target of £55.00 on this share?
Im going with your assumption.
Anyone looking for a good investment right now would be crazy to overlook Unilevers current share price valuation.
Long time
My mistake For buyback please read "special dividend"
As for a theoretical cash offer for the whole of Tesco, the proceeds would come under capital gains assessment. which as we know has a tax free allowance infinitely more generous than the current £2000 tax free divi allowance. HMRC would treat it as a normal holding sale. ie capital sale.
However Tescos SD -call it a "partial asset sale" - is clearly a dividend, as irs name suggests, and would be treated as income for tax assessment., even if you reinvest it thru DRIP. HMRC run a tight ship and are aware of loopholes designed to reduce tax liabilty.
Mike There can only be two SPs to consider. Because the buyback and consolidation take place at the same time. The £1.88 SP you mention will never show on Tescos share info. Its just a theoretical figure in peoples heads to account for the reduction in shareholders holding due to the special divi payout. But the consolidation immediately accounts for that loss, with less shares within the same market capitalisation. The MC can not be changed.