Worry about shares...

Tombot2012

Hi,

My Dad bought BT shares many years ago when he was an employee at the company. The value has fallen drastically in the past but still he is reluctant to sell and put his money into a savings account etc. He isn't a 'gambler' with money and is very careful with savings etc. but is using the money tied up in these shares as his 'lifeboat' or nest egg.. I'm am trying to persuade him that he would be better off, or at least safer, selling and having an ISA or similar.

Any advice would be greatly appreciated...

Glen_Clark

When BT was privatised, the Government privatised the assets and nationalised the liabilities. BT would probably have gone bust after the dot com boom were it not for the fact that if they did the taxpayer would be on the hook for their pensions liability, probably around £100bn. To avoid the poitical embarrassment of that, the Government turns a blind eye to BT's monopolies whenever it can, so there is very little chance of BT going bust.
I think its as safe a share as any.

Perelandra

Is your father by any chance a higher rate taxpayer?

If so, then a halfway-house solution might be to bed-and-ISA the shares. He would need to pay stamp duty (0.5%) on this transaction, but would more than make up that cost with the first year's tax savings (at BT's current dividend yield). After that, he's be saving the tax on the dividends going forward.

lvader

It had big peak and fall with the com bubble, but it is one of the better performing shares in the last few years, much better than a savings account.

Ifts

Heres a little info on BT:

In May, BT Group (LSE: BT-A) released full-year figures, and the things that stood out as highlights were cash flow, debt and dividends. Net debt actually rose by £266m, but that was after making a £2bn pension deficit payment -- so that's being tackled, and its risk is receding.
But the biggest news for me was the dividend, and it was very good to hear it had been hiked by 12% to 8.3p per share.
But there was even better news in the shape of forecasts for future payouts. The board now expects dividends to grow by 10-15% annually for the next three years and, even at the lower end, that means a yield of 4.4% on the current price of around the 205p level.
That's not guaranteed, of course, but it shows both a commitment to rewarding investors, and confidence in the future.

http://www.fool.co.uk/news/investing/2012/06/01/the-must-own-sector-for-rising-dividends.aspx

Glen_Clark

lvader wrote: »

but it is one of the better performing shares in the last few years, much better than a savings account.

Very crafty with their pricing. 0845 numbers over 30 times the cost from a BT callbox. Then, rather than admit they had increased call charges from a callbox, they increased the minimum call charge from 20 minutes (40p) to 30 minutes (60p). !!!!!! who is going to make 30 minute phone calls from a BT call box

Glen_Clark

Ifts wrote: »

Heres a little info on BT:



http://www.fool.co.uk/news/investing/2012/06/01/the-must-own-sector-for-rising-dividends.aspx

Yes they would rather increase dividends that tackle their pensions defecit, because if they go bust the responsibility for that would lie with the taxpayer.

The_pc_tech

As has been said, a fairly safe bet.

Remember they fully own BT Wholesale and Openreach.

heathcote123

Tombot2012 wrote: »

Hi,

My Dad bought BT shares many years ago when he was an employee at the company. The value has fallen drastically in the past but still he is reluctant to sell and put his money into a savings account etc. He isn't a 'gambler' with money and is very careful with savings etc. but is using the money tied up in these shares as his 'lifeboat' or nest egg.. I'm am trying to persuade him that he would be better off, or at least safer, selling and having an ISA or similar.

Any advice would be greatly appreciated...

I have no idea which way the shares are going other than they seem to be on an upward trend at the moment, but be very careful on giving investment advice/persuasion to friends and family. Would you have advised him to sell 2 years ago, since when they have doubled?

Unless he is of unsound mind, or you are providing paid investment advise, you're best of keeping well out of it.

chris_m

Glen_Clark wrote: »

!!!!!! who is going to make 30 minute phone calls from a BT call box

That is part of the problem, hardly anyone is making any calls from callboxes. They are expensive to maintain and the cost has to be covered by the revenue from what usage there is.

Glen_Clark wrote: »

Yes they would rather increase dividends that tackle their pensions defecit, because if they go bust the responsibility for that would lie with the taxpayer.

Is paying £2b into the fund this year, followed by further (not insignificant) amounts over the next, IIRC, six years not tackling the defecit?

If they didn't want to tackle it they could have increased divvies even more - at the same time reducing potential exposure to someone wanting to take them over because the reduced liability makes a takeover more attractive.

Glen_Clark

chris_m wrote: »

That is part of the problem, hardly anyone is making any calls from callboxes. They are expensive to maintain and the cost has to be covered by the revenue from what usage there is.

They took over a public service network, some parts more profitable than others, the profitable parts are supposed to cover the unprofitable parts.
I haven't used a call box for years, and am a shareholder, but I am not comfortable with what BT has done with the callboxes because the poorest people - those who cannot afford a phone at all depend on them. If they have to call a 0845 number - health service, benefits, or whatever where they are put through to a machine on hold, they are charged over 30 times the rate for a normal landline.

When the increase in profits has been driven by increasing charges on the poorest people to this level, rather than by growth or innovation, the profits growth is not sustainable. But, as I said, they won't go bust.