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Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

Practical discussions about equity High-Yield Portfolios (HYP) for income
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Dod101
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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166505

Postby Dod101 » September 15th, 2018, 7:55 am

ayshfm1 wrote: They are also the largest single holder ULVR stock.


Interesting. In the Unilever Annual Report and other documents they disclose that the largest holder of Unilever stock is Blackrock and the Leverhulme Trust.

I see in this morning's Times that Nick Train is voicing his concerns as well. As he says a big holding in a UK company is about to become a big holding in a non benchmark, non UK company. All is worth playing for, even if you are a small shareholder.

Dod

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166514

Postby moorfield » September 15th, 2018, 8:56 am

IanTHughes wrote:
pyad wrote:I don't really care one way or another about this because it won't make any difference to HYPers holding ULVR but a couple of debatable points have arisen.

Thanks for bringing this discussion back HYP relevance


Ian
(Not a holder of ULVR - Yield has never been high enough)


Quite so. Arguably this whole discussion of the corporate structure belongs on the new Company Analysis board, non?

Dod101
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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166517

Postby Dod101 » September 15th, 2018, 9:15 am

moorfield wrote:
IanTHughes wrote:
pyad wrote:I don't really care one way or another about this because it won't make any difference to HYPers holding ULVR but a couple of debatable points have arisen.

Thanks for bringing this discussion back HYP relevance


Ian
(Not a holder of ULVR - Yield has never been high enough)


Quite so. Arguably this whole discussion of the corporate structure belongs on the new Company Analysis board, non?


Moorfield Quite so what? You sound as if you are almost dismissing this as of no relevance to those holding Unilever. If so I beg to differ.

And some time ago it was agreed that Unilever was a fit share for discussion on the HYP Practical Board.

Dod

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166533

Postby moorfield » September 15th, 2018, 10:05 am

Dod101 wrote:
Moorfield Quite so what? You sound as if you are almost dismissing this as of no relevance to those holding Unilever. If so I beg to differ.

And some time ago it was agreed that Unilever was a fit share for discussion on the HYP Practical Board.

Dod


I came to read the thread looking to glean how the simplification of Unilever's corporate structure might impact upon my Practice of HYP.

I agree with pyad, IanTHughes here.

It doesn't.


(I agree btw that ULVR can be discussed here, indeed I argued that case, but very specifically within the context of a high yielding portfolio overall.)

I won't be adding any more to this.

ADrunkenMarcus
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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166542

Postby ADrunkenMarcus » September 15th, 2018, 11:06 am

From my perspective, I'm not too fussed if ULVR 'does Dutch'. I would prefer clarity on not paying Dutch dividend tax and that, of course, depends on the 2019 Budget passing and future Dutch governments leaving the change in place. ULVR's backup plan would only work for a few years IMHO. Having said that, 15% would not be unbearable and indeed I put up with 30% Finnish dividend tax with KNEBV (Kone).

What I do think is that the FTSE 100 will not perform as well as it would have done, if ULVR leaves it.

Best wishes

Mark.

idpickering
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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166544

Postby idpickering » September 15th, 2018, 11:26 am

I find this a bit sad, losing Unilever is akin, although obviously not as bad, to a death in ones family. What’s the alternative apart from just being Dorisian and hanging in there? Sell out and buy TATE? Is anyone thinking along those lines here I wonder?

Ian.

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166547

Postby ADrunkenMarcus » September 15th, 2018, 11:33 am

idpickering wrote:What’s the alternative apart from just being Dorisian and hanging in there? Sell out and buy TATE? Is anyone thinking along those lines here I wonder?


I'd suggest sticking with ULVR.

Even if its dividends did become subject to 15% Dutch withholding tax then the net dividend income could easily recover to its prior gross dividend income level in 2 1/2 years or so, assuming 7% dividend growth. That's on a nominal basis so inflation-adjusted would take longer.

Best wishes

Mark.

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166557

Postby idpickering » September 15th, 2018, 12:33 pm

ADrunkenMarcus wrote:
idpickering wrote:What’s the alternative apart from just being Dorisian and hanging in there? Sell out and buy TATE? Is anyone thinking along those lines here I wonder?


I'd suggest sticking with ULVR.

Even if its dividends did become subject to 15% Dutch withholding tax then the net dividend income could easily recover to its prior gross dividend income level in 2 1/2 years or so, assuming 7% dividend growth. That's on a nominal basis so inflation-adjusted would take longer.

Best wishes

Mark.


Wise words indeed, thank you Mark. I’m not prone to being fickle, and will more than likely do as you suggest. That is, stick with Unilever.

Ian.

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166563

Postby StepOne » September 15th, 2018, 1:51 pm

IanTHughes wrote:Investor A purchases a share yielding 2.5% which increases its dividend by 10% each year
Investor B purchases a share yielding 5.0% which never increases its dividend

It will be 9 years before Investor A enjoys a higher annual dividend than Investor B
It will be 15 years before Investor A's accumulated dividend overtakes that of Investor B

And that is assuming that Investor A's selection never stumbles and Investor B's never picks up

Do the maths yourself if you do not believe me[/quote]

Just a quick note to say I'm sure that maths is correct, but if you try it with company A starting on 3.7% and increasing it's dividend about 14% a year it'll catch up much quicker, which is what I've seen in my HYP.

Cheers,
StepOne

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166569

Postby Lootman » September 15th, 2018, 3:00 pm

StepOne wrote:
IanTHughes wrote:Investor A purchases a share yielding 2.5% which increases its dividend by 10% each year
Investor B purchases a share yielding 5.0% which never increases its dividend

It will be 9 years before Investor A enjoys a higher annual dividend than Investor B
It will be 15 years before Investor A's accumulated dividend overtakes that of Investor B

And that is assuming that Investor A's selection never stumbles and Investor B's never picks up. Do the maths yourself if you do not believe me

Just a quick note to say I'm sure that maths is correct, but if you try it with company A starting on 3.7% and increasing it's dividend about 14% a year it'll catch up much quicker, which is what I've seen in my HYP.

What his calculation is also missing is consideration of capital. Other things being equal share A will tend to increase in value by 10% a year as well, for a constant yield. Share B won't move, again for a constant yield. In fact A would double in value every 7 years or so if the dividends are reinvested.

Take that into account and A will be ahead in total return terms much sooner. And before Ian comes back with the "capital doesn't matter" mantra, I suspect that even he would agree that at that 15 year crossover point A will be worth about 4 times what B is worth. That's not nothing and would buy 4 times the income, to put it in those terms.

Factor in also that B has a higher risk premium and the situation is much less clear than is implied.

MDW1954
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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166578

Postby MDW1954 » September 15th, 2018, 4:35 pm

Lootman wrote:
StepOne wrote:
IanTHughes wrote:Investor A purchases a share yielding 2.5% which increases its dividend by 10% each year
Investor B purchases a share yielding 5.0% which never increases its dividend

It will be 9 years before Investor A enjoys a higher annual dividend than Investor B
It will be 15 years before Investor A's accumulated dividend overtakes that of Investor B

And that is assuming that Investor A's selection never stumbles and Investor B's never picks up. Do the maths yourself if you do not believe me

Just a quick note to say I'm sure that maths is correct, but if you try it with company A starting on 3.7% and increasing it's dividend about 14% a year it'll catch up much quicker, which is what I've seen in my HYP.

What his calculation is also missing is consideration of capital. Other things being equal share A will tend to increase in value by 10% a year as well, for a constant yield. Share B won't move, again for a constant yield. In fact A would double in value every 7 years or so if the dividends are reinvested.



Indeed.

Implicit in what ITH says is that Company A's yield stays constant at 2.5%. Given that ten years of compounding at 10% will have turned a £1 annual dividend into an annual dividend of £2.59, then a constant 2.5% yield will have seen the share price rise from £40 (1/0.025) to £103.60 (£2.59/0.025), or put another way, an capital increase of 159%.

As he says, do the maths.

Tricky stuff, this income investing!

MDW1954

IanTHughes
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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166579

Postby IanTHughes » September 15th, 2018, 4:37 pm

Lootman wrote:
StepOne wrote:
IanTHughes wrote:Investor A purchases a share yielding 2.5% which increases its dividend by 10% each year
Investor B purchases a share yielding 5.0% which never increases its dividend

It will be 9 years before Investor A enjoys a higher annual dividend than Investor B
It will be 15 years before Investor A's accumulated dividend overtakes that of Investor B

And that is assuming that Investor A's selection never stumbles and Investor B's never picks up. Do the maths yourself if you do not believe me

Just a quick note to say I'm sure that maths is correct, but if you try it with company A starting on 3.7% and increasing it's dividend about 14% a year it'll catch up much quicker, which is what I've seen in my HYP.

What his calculation is also missing is consideration of capital.

HYP is an Income Strategy and I was merely responding to StepOne posting about the level of income from a low yielding ULVR overtaking that from some of his higher yielding holdings.
Lootman wrote:Other things being equal share A will tend to increase in value by 10% a year as well, for a constant yield. Share B won't move, again for a constant yield. In fact A would double in value every 7 years or so if the dividends are reinvested.

Take that into account and A will be ahead in total return terms much sooner.

If Investor A is going to rely on re-investing his dividends then you must accept that Investor B would also re-invest his dividends, which being higher will buy more capital and earlier too. I believe you will find that the Capital appreciation would then be the same, all other things being equal of course. Please, do the calculation yourself if you do not believe me.
Lootman wrote:And before Ian comes back with the "capital doesn't matter" mantra.

Why you persist with this canard only you can know, all I can do is point out to you that HYP is an Income Strategy. This simply means that Capital appreciation is NOT the strategy's aim. That is not a mantra just a fact. Do read up about it, there are plenty of articles to choose from.
Lootman wrote:I suspect that even he would agree that at that 15 year crossover point A will be worth about 4 times what B is worth. That's not nothing and would buy 4 times the income, to put it in those terms.

Only true if A and B both draw all the income and irrelevant to my point about the relative levels of income, over the years
Lootman wrote:Factor in also that B has a higher risk premium and the situation is much less clear than is implied.

Well of course B has a higher risk premium, but what has that got to do with the very clear point about relative Income streams?


Ian

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166581

Postby Lootman » September 15th, 2018, 4:43 pm

IanTHughes wrote:If Investor A is going to rely on re-investing his dividends then you must accept that Investor B would also re-invest his dividends, which being higher will buy more capital and earlier too. I believe you will find that the Capital appreciation would then be the same, all other things being equal of course. Please, do the calculation yourself if you do not believe me.

The calculation has A increasing in value at 10% a year and B not moving. So the reinvesting will boost B's income by 5% a year, but will only boost B's capital by that same 5%, whilst A is going up by 12.5% a year initially and then more each year.

It is you who needs to do the calculation, showing capital as well as income. Showing one and not the other is showing only half the story.

monabri
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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166586

Postby monabri » September 15th, 2018, 5:24 pm

Based on current yield (*) and current growth rates over the last 5 years (*), one would invest £1000 lump sum in ITV as the cumulative dividend over the next 15 years would be £183k..... (all dividends reinvested back into buying more of ITV at the same yield.)

Well, that's what the computer model says!




The only problem is that reality kicks in and companies issue a profits warning (SSE) or hold their dividend (WPP) and the modelling goes out the window...past performance being no guide to the future. As for guessing the increase in a share price over the next n years ...?

Back to Unilever
Does one invest in the likes of ULVR (second from the bottom of the table after Reckitt?) based on the income return after 15 years ?

Does anyone seeing ULVR stepping up a gear and paying a higher yield or improving their growth rate (I personally don't). I see challenges from the supermarket own brands (Aldi/Lidl) which are cheaper in cash strapped B-word Britain.

Not to mention the significant increase in debt that has been taken on recently.

There's just not enough to attract me to ULVR regardless of where it is based.

ps. I hold shares in ITV but I really don't believe for one nanosecond that the dividend growth will continue at the current 22% (Internet, You Tube, Netflix, Amazon).

modelling...schmodelling!

(*) data from dividenddata
https://www.dividenddata.co.uk/dividend ... &order=#AV.
Last edited by monabri on September 15th, 2018, 5:31 pm, edited 4 times in total.

IanTHughes
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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166587

Postby IanTHughes » September 15th, 2018, 5:30 pm

Lootman wrote:
IanTHughes wrote:If Investor A is going to rely on re-investing his dividends then you must accept that Investor B would also re-invest his dividends, which being higher will buy more capital and earlier too. I believe you will find that the Capital appreciation would then be the same, all other things being equal of course. Please, do the calculation yourself if you do not believe me.

The calculation has A increasing in value at 10% a year and B not moving. So the reinvesting will boost B's income by 5% a year, but will only boost B's capital by that same 5%, whilst A is going up by 12.5% a year initially and then more each year.

It is you who needs to do the calculation, showing capital as well as income. Showing one and not the other is showing only half the story.

Only if one assumes that going forward A only invests in Low Yielding/High Growth while B only invests in High Yielding/No Growth shares.

Of course my initial point, here on the HYP Practical board, had nothing to do with capital at all. My single intention was to point out the differing income streams and that the time taken for a lower yield share's dividend to "overtake" the dividend of a higher yield was longer than people sometimes believe.

I forgot that so many do not understand the HYP Strategy


Ian

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166594

Postby IanTHughes » September 15th, 2018, 6:03 pm

StepOne wrote:Just a quick note to say I'm sure that maths is correct, but if you try it with company A starting on 3.7% and increasing it's dividend about 14% a year it'll catch up much quicker, which is what I've seen in my HYP.

Of course. ULVR has been an impressive Dividend grower for sure.

Like you, I have a holding of British Aerospace PLC (BA), bought at the very start of my HYP in February 2012. In my case, if instead of BA I had purchased the same value of ULVR, the holding's dividend would still be lower than what I now am getting from BA, six and a half years later. If I had purchased British Land PLC (BLND), another of the Higher Yielders you mentioned, my current dividend would be even higher still.

With the other shares you mentioned, BHP Billiton (BLT) and Pearson (PSON) both suffered from dividend cuts, and the dividend from Glaxo SmithKline (GSK) has been held unchanged for a number of years. The level of dividend from most holdings would probably have overtaken them!

As I said, I was only trying to point out that the income from a High Growth/Low Yield shares can take a long time to catch up to that from a High Yield/Low Growth share, unless the disparity in Growth is exceptional and/or the difference in yield is small

Anyway that is my last word on the subject


Ian

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166596

Postby Itsallaguess » September 15th, 2018, 6:10 pm

IanTHughes wrote:
As I said, I was only trying to point out that the income from a High Growth/Low Yield shares can take a long time to catch up to that from a High Yield/Low Growth share, unless the disparity in Growth is exceptional and/or the difference in yield is small.


Or the High Yield/Low Growth share takes a stumble during the comparable period....

Such occurrences are not rare, unfortunately.....

Cheers,

Itsallaguess

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166597

Postby csearle » September 15th, 2018, 6:12 pm

Moderator Message:
Guys can we bring this spat regarding calculations with and without capital appreciation to an end. It is all getting far too personal. You are all doubtless fully understanding of any maths involved. It is a disagreement, let's just leave it at that. The subject, going forward, is Unilever. Thanks. - Chris

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166618

Postby Dod101 » September 15th, 2018, 9:14 pm

I doubt that I would sell Unilever even if it does go Dutch but pyad and others are far too complacent re the proposals. Still these is nothing more I can do if they do not exercise their shareholder's rights or even worse vote in favour.

Dod

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#166625

Postby ayshfm1 » September 15th, 2018, 10:58 pm

I also think they are complacent.

The question I ask is what recourse would I have if predictions about withholding tax turn out to be incorrect? (I initially wrote promises but realised ULVR is no position with National Government tax policy to do any more than predict).

The answer is none - I would have to play the hand ULVR management dealt me no matter what it consisted of. If however things stay as they are then I don't even need to consider withholding tax or any other hitherto undiscovered issues.

I can see no reason why any UK shareholder would be in favour of this, there are no upsides, at least if there are I can't find them. There are however plenty of downsides not least this all costs money. They expect to recoup this money through the improvements to the corporate structure. I'm sceptical and even if they do it'll take a lot of years. Realistically a rather more likely scenario is botched execution which ends up burning cash and distracting management from running the core business.

Small beer to us, but this a multi-billion company with many funds holding million of pounds, whilst these funds tend to back managements I'm struggling to see why they would in this case. Case in point, me. I'm here to clip the dividends as long as they keep rolling I'm happy to let the management manage. However the possible consequences of this move are sufficiently far reaching that it wakes me up, if I'm awake the big fund managers are going to be positively frantic, I've yet to see a rationale that makes it anymore palatable for them than it does for me.


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