Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Nige
The short answer is "Yes" - especially if you go the full 9 yards to final divi payout. The strengthened company will bring the benefits as well. Its impossible for you to be worse off. It seems the general question people are asking is "Is the buyback worth it?" or "should I bail out now?" (But too late now). I repeat - You do NOT need nerves of steel for this one.
Just think of the companies that are currently not paying any dividends and absent of any prospective benefit at the moment due to Covid. Tesco final results after 28 Feb 21 are very promising with increased online sales which are likely to be permanent - and they are the leader in the market share game and particularly in increasing online sales.
You are actually right Dave. There is a possible benefit (if Tesco have judged market sentiment right) in the shares rising in the same proportion as the consolidation ratio 19 divided by 15, which brings the £2.42 baseline 22/1/21
price up to £3.06. Whether that happens - or not is moot. But in theory 100 shares for eg in a 50% consolidation would double their value, because the market capitilisation is not changed by the buyback.
Re the Dave Lewis remark - a cynic might suggest that a compulsory buyback is a device to make the final results on 28 Feb 21 ( just 13 days after the consolidation date coincidentaly) look better for management. Example: Earnings per share will magically rise due to less shares. The question is "Will the divi rise by at least the same proportion?". It SHOULD given that we the shareholders have financed it by our lower holdings post consolidation. DLs remark about giving back to shareholder after the accounting scandal can not be argued with, but whether that is the real reason, or a "sub reason" is for the owners of the company - the shareholders - to decide.
Worth mentioning that if your holding is a small one and/ or you do not hold in an ISA or other tax free vehicle because you're not a taxpayer, then any loss due to taxation does not apply.
the UNI price fell to £35.00 or so, reason - can't remember but likely because of time of year (February) when investors had thin wallets after Christmas. I immediately shot in with a mobile phone buy from the Canaries where I was on holiday ( something I would not normally do, preferring hard wire desktop). Scale of drop was comparable to present one. Sure enough, before my holiday ended , the SP had shot back up to a respectable level . Quality shares do not disappoint- that's the lesson I learnt. The present situation in February 21 is much the same and I got in at under £40, only this time I'm keeping holding both for the increased divi as well as the very potential capital gain. As one expert said " If you don't buy when they are cheap , when do you buy them?"
Is largely down to the size of the SD. It involves existing shareholders copping for a large sum, and prospective investors searching out if they can make a quick buck. But Tesco don't want short term get -rich -quick investors. It does not encourage shareholder loyalty. SDs combined with consolidations are an American led trend that has spawned itself into the UK and likely to spread. How you feel about that depends on how much you prefer the good , old fashioned, honest special dividend dispensed by firms who have has an exceptionally good year for genuine profits. You can not blame some investors for thinking the American trend is a case of " cutting the feet to fit the shoes". Lol
Please Boys! NO recriminations on Monday morning. We are all in the same boat,whether we have sold out today or kept our shares. My guess is that both camps will be approx just as well off whatever we do except for a slight benefit for those who go the full nine yards for the final dividend qualification date of May.)
You do not need nreves of steel for this one lol
Today 12 Feb : Last chance saloon
Concise summary - If you dont sell today and the SP remains approx the same next week, ypu will have "gained" via no drop in the SP. If the consolidation on Monday results in a subsequent rise in SP you will have gained. If the lead up to the May final divi qualification date shows a higher SP, as is likely, on the strength of final results, you will have gained (and also the choice of whether to sell out- ot not). If one or more of these do not occur, you are likely to be no worse off.
Three possible/likely short term gains. Thats good enough for me.
I remember National Grid having a consolidation a few years back, but it was incorporated into a final dividend and so did not have the double positive effect that the separate Tesco
special divi, separate Tesco consolidation and separate final divi has. That holding never wenr into positive territory afterwards, though the divis kept coming at nearly 5%. But then NG is a utility - enough said.
Summarising - The first to look for is whether the consolidation will work out as planned - Will the SP drop, as is usual, with post divi SPs? The second is will the SP rise towards May final divi qualification date due to the "strengthened" Tesco? If you believe "Yes" to both then you should be holding or buying (especially at todays 2.40 SP). If you are happy with a large holding showing a good profit at todays pre consolidation SP then sell today.
Bear in mind there are still many FT100/250 companies still paying NO divis at the moment, and with no hints that they will in the near future. And those companies do not show the same optimism that Tesco does with its likely final year results due at end of February with almost certainly good profits from hugely increased online sales.
Its a comparative exercise, and Tesco is one of the markedly better bets at the moment in the middle of the Covid crisis.