RE: Directors share options and dividends1 Dec 2019 11:46
Morning Benjie and John, not sure why the share price would drop by the amount of the dividend, unless you are assuming that the market valuation is based on the amount of cash the company holds because it hasn't been up until now.
I accept that there will be a drop as some will buy in anticipation of the dividend, then sell and others will sell because the price is expected to fall ex-dividend and hope to buy them back at a lower price. The drop could be higher or lower than the amount of the dividend, but to my mind is not conditional on the amount.
I also don't accept John's contention that it is pointless to pay a large one off dividend as this is unlikely to followed by regular dividends. Whilst much of the cash received will be used to fund further acquisition and exploration, the continued sale of these projects into the JV at 3x exploration costs will supplement the remaining 23.5% profit share and cash flow from the JV. Absolutely no reason why a regular dividend cannot be paid, albeit probably at a lower level than the special dividend.
As for the share options, it will be in the Directors' interests to increase the share price after the ex-dividend drop over the next year by adding value, if they wish to exercise them at a significant gain. It is also conceivable, however, that the options will not be exercised. They received a lot of criticism when they were awarded and consequently have never awarded themselves any options since. They would also have to raise a significant amount of cash to exercise the options. Doing so by selling shares to raise the funds would send entirely the wrong message at this time and almost certainly lead to a drop in the share price, potentially below the exercise price.
With regard to paying tax on dividends on shares sitting outside a pension or an ISA, it will be taxed as income tax at whichever marginal rate applies - 32.5% in my case (after the first £2,000, which is tax-free) as I am a higher rate tax payer (lucky me!) - and I will simply transfer the tax due out of the cash received in my fund and share account. No need to sell any shares to pay the tax. I can then, if I wish, re-invest the remaining cash and buy more shares. If everyone else does the same, it will potentially increase the share price.
Just my thoughts.....
Cheers, Ash
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