So tesco have confirmed a 50p dividend in Feb. With the stock at 244p this sounds amazing, roughly a fifth of the share price! Then from what I have read this coincides with share consolidation of 15 new shares for every 19 existing shares. My question is, with a consolidation like this, is the price per share likely to go up or stay the same after consolidation? If it stays the same then you won’t make much from the dividend but if the price per share goes up to reflect the consolidation then there is some nice money to be made from the dividend! I’ve bought into tesco anyway as its a solid stock so fingers crossed
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Could go up temporary. However a reverse split is not a good signal. Most of the time the stock price will go down afterwards. A reverse split (or consolidation) is done to raise the stock price.
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Also, a large one-off dividend is sometimes irrelevant.
For example, in this case it is likely that after the ex-dividend date, you may buy the stock with the dividend discounted (unless the market decides to rise or sentiment/news about Tesco improves around those days).
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Is Tesco even a good stock?
I don’t know really. There is definitely worse out there. I just wondered if there could be a quick buck to be made with the dividend pay out.
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I’m up 16% on it over the last few months with no plans to sell
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I think the consolidation is to prevent a fall in share price, which usually happens after ex-dividend date. But as you have correctly pointed out, even if the price does not fall an investor will have 4 less shares for every 19 shares. The difference works out nearly equal to the dividend of 51p, so how is the investor benefitting? And the dividend will count towards your dividend allowance (unless you have it ISA), so if one is getting dividends from other sources exceeding the allowance, one would be subject to 7.5% dividend tax.
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I think that the primary benefit is to reduce the outstanding shares so that they trade at higher prices in the future after the dividend is paid.
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Cheers for the replies. Looking at it, I don’t think there is much to be made as the consolidation will most likely wipe out any gains from the dividend.
I believe this is a special dividend linked to the sale of their Thai and Malaysian businesses
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How will this consolidation be managed by Trading212?
I already have tesco which i bought @ 216 and 211…was gonna buy more cos of the special dividend but seeing the post, i will just maintain my current level.
I do believe in Tesco, they control about 25% of the UK grocery market alone and not to mention other sides of the business.
An article in FT - Subscribe to read | Financial Times
What I am not clear about is the ex-dividend date, which I know is 15 Feb. However in the FT article is say’ " The 50p a share payout is equivalent to about a fifth of the share price. Normally, the share price would fall by that amount the moment the cut-off point for eligibility to the special dividend is reached. In this case, it is February 9." Does it mean that the ex-dividend date is 9 Feb?
The article is incorrect or has given you the incorrect impression of the dates. The Tesco announcements and FAQ on their investor page make it clear that both the dividend and the share consolidation apply to the share owners at close of play on the 12th. Because it’s a Friday it gives the extra gap to the ex-dividend date of the 15th.
https://www.tescoplc.com/investors/shareholder-centre/shareholder-meetings/
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Hi @Team212 could someone let us know what we’ll see in our accounts for the share consolidation please assuming it’s approved?
Okay, so if anyone’s interested. The total shares was updated to the new value and an information notification was in the notifications tab letting people know that the 15-for-19 consolidation was completed successfully and linking to the knowledge base article on splits.
Take Tesco for example - if one was in profit on Friday, should they still not be in profit today (subject to the current stock price)?
Not here. That was the impression I got reading Tesco’s information and intention of doing the buy back to protect the share price.
Logged in to T212 this morning to find Tesco being one of the worst performing positions I hold. Just double checked my buy prices after reading your question and actually the price I have in my list makes no sense at all.
Looks like there’s some kind of sell of the old/buy of the new but that’s completely butchered my price per share in my position.
@Team212 How was the consolidation done from a maths PoV?
It is expected that your average buy price will change, but hopefully someone from the team can confirm the details for you.
But for example think back to Tesla’s stock split that took the stock from in the thousands to in the hundreds. You wouldn’t expect someone with a buy price of say £1800 suddenly be down over a grand following the split? Everything should be adjusted by the same ratio so that there is no change in total market value (other than general market movements)
Actually, that may make perfect sense as the amount of money you’ve paid for the shares hasn’t changed but now you have fewer shares for the money so while sucking it makes sense from an investment PoV. You’ve put this much money in and seem to have less than you did before. That assumes it’s not a sell+buy though which I don’t think it is.
The other thing is that the price on Friday was much higher than anything I’d paid so then if a sell+buy was done for the consolidation I then “bought” shares at a much higher price than I’d paid before and then today when the price plummeted it’s lower than the price the consolidation was done at.
Makes me think consolidations are dangerous to one’s investing positions and I shouldn’t just hold through them in future.