Standard Life - 73p Cash Payment But .......

Linton

sabretoothtigger wrote: »

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Pensions pay income tax on share income. Gordon Brown changed this, its a massive money maker for government hence they will not revert it back, cannot as gov is too poor now

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Pensions dont pay income tax on share income. Income tax is a tax on personal income.

To explain again what happened...

Dividends are paid after corporation tax has been deducted from company profits. For tax accounting reasons this was translated into an arbitrary and fictional tax of 10% on personal income from dividends which was paid for by a 10% tax credit note issued with the dividend.

Prior to the changes this fictional 10% was refunded to pensions. GB took the view that since the 10% tax was never taken in the first place there was little justification to repay it, especially if the proceeds could be used to reduce corporation tax which in theory would lead to an increase in dividends.

As it happens all of this 10% nonsense was been swept away by the rejig of pension taxation in the 2015 budget implemented from April this year. For this reason things cannot go back to how they were. If the government wanted to subsidise pensions it would have to do it explicitly.

Spidernick

bowlhead99 wrote: »

The company used to be larger and more valuable ; it used to own a large Canadian business employing thousands of people and making millions of pounds profit a year. Now the company is smaller because it has sold Canada and will not necessarily make so many million pounds profit per year. It received $3 billion for selling Canada and gave most of that right back to its shareholders so that the resulting cash wouldn't be languising in its bank account doing nothing.

As a consequence, what you as an investor now hold is a bunch of cash in your hand, and a smaller investment, in a smaller and more efficient company (your ownership percentage of the company is unchanged).

But the company is now smaller, so the overall dividend annual dividend it plans to pay out in actual pounds is lower than what it would have paid out in actual pounds when it was bigger. You are right it will be the same or an increase in relative terms which is what important.

For you as an investor, you are getting the same or better in relative terms as a dividend but you are getting fewer actual pounds than you would have if you had held a larger investment. But you don't hold a larger investment you hold a smaller investment and 73p per old share in your hand. If you want to receive more money, you can do something with the 73p. You could put it in a bank account earning 5% a year risk free. You could invest it in the Canadian company that bought SL's Canadian division. You could invest it in any one of 5000+ shares on the UK or North american stockmarkets or into over 3000 options from a UK investment fund supermarket. Or you could invest it into SL, a smaller and leaner and more efficient company which is paying out more dividends in relative terms than it used to. There are plenty of choices. It was entirely right that SL distribute their spare cash from the Canadian sale to you, so that you can make those choices, rather than hoard it in their company bank account with no use for it.

If you choose not to do any of these things, you can't be surprised that you receive fewer absolute pounds of income every year. You are getting the same or greater relative returns from SL as you were before.

This was a very useful post from over a year ago, but the question I now have to ask is: if this company is more efficient, why has the share value seemed to have dropped every time I have gone into my account since?

The overall value of my shares plus the cash I received, is now significantly lower than it was before the payout. As such, I cannot but think that this hasn't worked out very well as all (thus far), but hopefully you (or someone else) can put my mind at rest around this.

sabretoothtigger

You'd have to look over five years. Similar things can happen with a normal dividend, it can be best to sell before it goes ex div and then buy afterwards on some gloomy day with news that really isnt a fault or flaw of the company

The Canadian business would have garnered more now with a weaker sterling. Also that foreign income would have an on ongoing bigger positive.
I presume they had good reasons to sell it, I was hoping SL expanded in Asia but it was a token effort and Ive not heard of much growth. Pru has this.
Growth in UK has been good though due to regulation changes?

So SL has done well recently, good recovery on that brexit low. Pity I didnt dive after it but I did get some. I might sell with a stop below Aug low, 350 is a bit of a tide mark.
420 is a good upside target ( a common price in last five years)
Im not sure overall I need to read, have to conclude SL has been a good hold