How panic-y have you got ?

Thrugelmir

Pincher wrote: »

Sold a lot of Royal Dutch Shell B at £18.09, and made over a years worth of dividend in capital gains. If I buy back within 30 days, the anti bed and breakfast matching rules will mean the capital gains is wiped clean. It's so obliging, and went down to £17.34 already.

Ideally, I want it to go down to £15, in the next 25 days, so I an snap them up again.

So, let's sink the western economy, just so I can buy RDSB cheap.

Dive sucker, dive!

What's the sustainability of the dividend though?

Thrugelmir

Shmo wrote: »

As a dividend investor it's all fairly inconsequential. There's plenty of cheap yield around on the UK markets right now. For instance, Marks & Spencer yielded 7% this year on current price and they don't appear to be hurting for cash right now,

Don't you think that the market is telling you something? The list of companies cutting dividends is growing.

bowlhead99

Shmo wrote: »

. There's plenty of cheap yield around on the UK markets right now. For instance, Marks & Spencer yielded 7% this year on current price and they don't appear to be hurting for cash right now

At its most recent annual results announcement a few weeks ago, the company warned that profit would decline at least in the short term (on top of the 19% decline in pretax profit they posted, albeit including exceptionals). Profits warnings just one of the reasons the price is lower than it one was, implying a high yield when you look at current price versus previous dividends.

Comparing a dividend that could once be afforded to be distributed when profits were higher, with a current lower price that reflects the market's assessment of how the company is positioned now and what could go wrong in the future, gives a flattering picture of a company in terms of a 'nice' yield, and is the sort of thing that's caused many investors to become unstuck with loads of companies in the past.

On the day of the results announcement Cantor Fitzgerald said

We still have concerns that the company will not be able to reverse the declines in General Merchandise (GM) LFL sales while the rate of growth in GM gross margins is likely to slow. In the meantime, the Food division will face a more competitive market, pre-tax profits look set to remain range bound and net debt remains stubbornly above £2bn.

You can interpret that as "not exactly strapped for cash" if you like, though it doesn't read that way. What happens when the Brexit (currently predicted by the polls) happens, resulting in decline in GDP and an increase in imported materials prices due to weaker pound (predicted by most credible economists in event of Brexit)? What does that do to the margins which are already struggling with "challenging market conditions"? M&S gets its major income streams from here rather than abroad.

I must confess to not following M&S particularly closely, the above quote was just from googling Marks and Spencer results. The general principle is that if an old dividend payment looks high next to a current share price, there's usually a reason for that.

Pincher

Thrugelmir wrote: »

What's the sustainability of the dividend though?

I was going for an Emperor Nero vibe. The title of this thread is panic, and I am painting a picture of financial collapse by referring to the burning of Rome. Dive sucker Dive = Burn Rome Burn.

As for sustainability of the dividend, I have no shares in RDSB right now. At £15 a share, I'm game.

Given the choice, I'll take the capital gains. At higher tax rate, dividends are 32.5%, but capital gains is 20%. I am filling the £5,000 dividend allowance boot already. What I want is to use up the £11,100 capital gains allowance, so I DON'T stray into higher rate tax band.

bowlhead99

Pincher wrote: »

Given the choice, I'll take the capital gains. At higher tax rate, dividends are 32.5%, but capital gains is 20%. I am filling the £5,000 dividend allowance boot already. What I want is to use up the £11,100 capital gains allowance, so I DON'T stray into higher rate tax band.

Maybe I'm misunderstanding your post #121 above. You said you, "made over a years worth of dividend in capital gains". Not sure if on your investment size, a years worth of dividend you're talking about is £1k or £10k or £20k?

You say you want to be able to buy them all back at £15 because those purchases will wipe clean the capital gain through the 30 day match concept. But I don't see how it would wipe it clean. You would have bought a bunch of shares at £15 which would be matched with your recent sales at £18.09 and create a £3.09 per share gain. So there would still be a gain.

Whether that's bigger or smaller than your current gain, i suppose depends on whether you originally bought at £13 on bargain day this January or at £16 in the 3-4 months either side.

Also you mention that you want to use up your annual gains exemption to avoid going into higher rate tax. But if you do a cheeky buyback to match your sales and only create a low gain this year, you might not necessarily do a very good job of utilising the £11k exemption and as a consequence, have a large gain stored up which threatens to push you into higher tax next year instead.

I guess it's tricky to follow other people's strategies sometimes when you don't really know their background. I tried to put two and two together and what I *think* you might be getting at, is that you had sold (say) 3000 RDS shares for £18 each (£54k proceeds) against £13 cost (£39k cost) giving a £15k gain which is over your annual exemption of £11k and creates a tax bill on £4k of gains that you don't want.

And instead if you buy the same shares back for £15 each (£45k cost) the £45k is matched with the £54k recent proceeds to give only a £9k gain which uses up your annual allowance quite effectively?

Anyway, it's none of my business, just being curious/nosy as sometimes other people's posts about their tax planning can be difficult to decipher.

Pincher

bowlhead99 wrote: »

Maybe I'm misunderstanding your post #121 above. You said you, "made over a years worth of dividend in capital gains". Not sure if on your investment size, a years worth of dividend you're talking about is £1k or £10k or £20k?

Alas, didn't have the money to pick up RDSB at £13 in January,
but did pick up a tranche at £15, and another major tranche at £16.80.

For one share, if you buy at £16.80, and sell at £18.09, the capital gains is £1.29. On the day of sale, the GBPUSD exchange rate was about 1.45. The historical annual dividend for RDSB is US$1.88, which is £1.29. So, I could wait a year for this £1.29 , or I can just have it NOW by selling.

Actually, 1,000 shares was bought at £15, and sold at £18.19, because it was inside an ISA, and meant for long term holding, but I thought if it went that high, it's profit taking time. It was a limit order I didn't really expect to hit.

To be honest, this matching thing didn't work out for me the last time it happened. An accountant said he worked it out so I had an extra £2,000 capital loss I could carry forward. He said it was all agreed with the Inland Revenue (then called), and he filed the tax return. Next year, the accountant had emigrated to New Zealand, and the Inland Revenue rang me up to say where does this £2,000 loss come from. I wasn't going to go into the jungles of New Zealand to find this accountant, so we just agreed to disallow it, and life carries on.

So, buy at £16.80, sell at £18.09, but if I buy back today at £17.14, i.e. within 30 days, my understanding is that they treat it as if I hadn't sold at £18.09, due to the anti-bed and breakfast rule. When I do sell again, the acquisition cost is £16.80.

Even if the matching thing doesn't work like how I think it works, the capital gains is within the £11,100 allowance. 10% tax on capital gains if I do go over £11,100 subsequently.

It would be hilarious if I buy it back tomorrow at £16.80, so I have got a year's worth of dividend in hand, and will get another set of dividends anyway. Sweet :j

Actually, the volatility means I managed to pick up HSBA at £4.25, so the £5,000 dividend allowance is spoken for. Have to pay tax if I got RDSB dividends.

LHW99

If it was in an ISA surely capital gain is irrelevant?

Pincher

LHW99 wrote: »

If it was in an ISA surely capital gain is irrelevant?

The 1,000 shares in the ISA was bought at £15.

The £16.80 tranche was not in an ISA.

cisamcgu

The above few posts make me thankful for funds and ISA's .. I have less £1000 in individual shares. I would hate to have to cope with such complexity

Pincher

cisamcgu wrote: »

The above few posts make me thankful for funds and ISA's .. I have less £1000 in individual shares. I would hate to have to cope with such complexity

Alas, could not put a house in an ISA.

Had around £600k in capital gains on a BTL, and the £33k of losses built up outside ISAs over fifteen years was put to good use.
That is just the start of it, Letting Relief, Capital Gains allowance, property improvement, anything and everything to cut down the CGT bill. Amusingly, if I had replaced the kitchen sink, I could deduct that against the capital gains. Unfortunately, I could not say "including the kitchen sink". Hold it, I did change the tap!

It does mean keeping documents for the entire ownership period. :eek:

Still, the leftover after paying the capital gains tax makes it all worthwhile. :j