Pennon shares dividend?

moneymabel

As a newbie to shares I'm a bit confused! I have some shares in Pennon which today have been consolidated 3:2. I understand that and I realise that there will be a special dividend of £3.55 per share, but the stock has dropped today so I won't actually be any better off? Is that how it's supposed to work? Any help for the hard of understanding much appreciated!

eskbanker

Yes, share consolidations/splits/etc don't generate any inherent value so the share price will typically adjust to reflect that the company valuation remains essentially the same, less the one-off dividends.

moneymabel

eskbanker said:

Yes, share consolidations/splits/etc don't generate any inherent value so the share price will typically adjust to reflect that the company valuation remains essentially the same, less the one-off dividends.

Thankyou so much for your reply, makes sense!

nfs_daemon

Yes, I know this is a very old post, but it is also very relevant to what I want to ask.

Pennon returned dosh to shareholders by paying a special, large, dividend.

In 2022 Aviva returned dosh by issuing special shares at the price of the give-back they wanted, then immediately redeemed them, they declared a cost basis for those shares, and a cost basis for the new consolidated ordinary shares.

That meant that the Aviva return was a capital gain, subject to CGT, with all the thresholds and allowance for losses elsewhere.

And the Pennon return was a straight dividend payment, a lower threshold, and a higher % rate and no concept of losses to offset.

I paid nothing for my Aviva return, but quite a lot for my Pennon one.

Does anybody have any idea why Pennon did it that way?

wmb194

nfs_daemon said:

Yes, I know this is a very old post, but it is also very relevant to what I want to ask.

Pennon returned dosh to shareholders by paying a special, large, dividend.

In 2022 Aviva returned dosh by issuing special shares at the price of the give-back they wanted, then immediately redeemed them, they declared a cost basis for those shares, and a cost basis for the new consolidated ordinary shares.

That meant that the Aviva return was a capital gain, subject to CGT, with all the thresholds and allowance for losses elsewhere.

And the Pennon return was a straight dividend payment, a lower threshold, and a higher % rate and no concept of losses to offset.

I paid nothing for my Aviva return, but quite a lot for my Pennon one.

Does anybody have any idea why Pennon did it that way?

BIB, probably because it's cheap, simple and its major shareholders didn't mind. "The company declares a special dividend." Shareholders approve it at the AGM, money distributed. Done. 

Aviva's B share and share consolidation approach was relatively far more complex: see the c.52 page circular for it linked on the page below. I remember people coming onto this and other forums being confused by it and what it meant for their holdings and tax.

https://www.aviva.com/investors/managing-your-shares-faq/#return-of-capital

Hoenir

Aviva was a return of capital. Pennon was a distribution of revenue reserves. The share consolidation was independent of the dividend distribution.  Aviva permanently shrunk it's capital base. Pennon reduced the physical number of shares in circulation. 

DRS1

Hoenir said:

Aviva was a return of capital. Pennon was a distribution of revenue reserves. The share consolidation was independent of the dividend distribution.  Aviva permanently shrunk it's capital base. Pennon reduced the physical number of shares in circulation. 

I am not sure how independent it was.  If they had not paid the dividend they would not have done the share consolidation.  The consolidation was to keep the value of the shares the same after the dividend as before and was largely for the benefit of option holders.

nfs_daemon

wmb194 said:

Aviva's B share and share consolidation approach was relatively far more complex: see the c.52 page circular for it linked on the page below. I remember people coming onto this and other forums being confused by it and what it meant for their holdings and tax.

https://www.aviva.com/investors/managing-your-shares-faq/#return-of-capital

Seemed pretty straightforward to me.

wmb194

nfs_daemon said:

wmb194 said:

Aviva's B share and share consolidation approach was relatively far more complex: see the c.52 page circular for it linked on the page below. I remember people coming onto this and other forums being confused by it and what it meant for their holdings and tax.

https://www.aviva.com/investors/managing-your-shares-faq/#return-of-capital

Seemed pretty straightforward to me.

For me as well but you'd be surprised how people struggle e.g., have a look at the current IDS threads re its takeover and the current Aviva/General Accident preference share cancellation/tender situation. Many people 1.  don't read the documents and 2. don't understand them when they do. Dividends are easy, though.

Anyway, as minority shareholders we're just along for the ride.