daveh wrote:monabri wrote:Cut from 96p last year (32p and 64p)....and after we were tapped for money to cover off additional costs on the Aberdeen peripheral route.
Yes a cut on last year, but I took up the rights and my dividend in cash terms is slightly increased on last year (for an approx. 14% extra cash payment). ...
Yes - but you can pretty easily boost the dividends that will be paid by
any of your holdings by 14% (more than just "slightly", I feel) just by adding cash equal to an extra 14% of their current value! The only real difficulty is getting hold of the cash to make the required purchase...
But similarly, anyone who didn't take up any of their rights will have received a lapsed-rights payment, which is essentially a one-off receipt of cash for losing part of their holding, namely the rights. And it's very easy to take cash out of a holding by selling, with the only penalty being that the holding has less value and produces less in the way of dividends afterwards. The only real difference is that with a rights issue, one doesn't have to actively do anything in order to effectively sell part of the holding...
So neither the -20% reduction suggested by the reduction in the dividend per share from 64p to 49p that monabri mentions nor the slight increase that you've experienced fairly reflects what an investor who kept the same amount of capital in the holding would have experienced. The three main ways of doing that are 'tail swallowing' (selling just enough rights to raise the capital to take up the rest), selling all the rights and reinvesting the proceeds in the shares, and letting all the rights lapse and reinvesting the lapsed-rights payment in the shares. All of those would produce an intermediate outcome on the cash dividends the investor receives, and every one of them involves at least one market trade, so the exact outcome depends on timing. But unless market prices change a great deal during the course of a rights issue, the outcome can be calculated fairly accurately (typically within a percent or two), and companies effectively do such a calculation when they apply rights-issue adjustments to their prior year dividend figures.
So anyone interested in a reasonably accurate fair assessment of what's been done to the dividend in a period when there has been a rights issue should basically look at what the company says in their results announcement. In this case, it's:
"Full year dividend per share
5 77.0p 86.0p -10%"
If they go down to the footnotes (quite a way!), they'll find:
"
5 2017 restated due to rights issue (note 6)"
and if they head much further down to the notes to the accounts, they'll find:
"
6 DividendsThe dividends per ordinary share for 2017 in the tables below have been restated by adjusting those previously reported by an adjusting factor of 0.11147 to reflect the bonus element of the shares issued under the rights issue which completed on 16 April 2018."
In essence, that's saying that the treatment they're using is that of the value of each pre-rights-issue share before the rights were issued, 11.147% (i.e. just over 1/9th) went to the rights, so each post-rights-issue share was only worth 88.853% of what it had been and so only should only be treated as having earned 88.853% of previous dividends. That's basically similar to what happens on share splits and bonus issues, where after e.g. a 2-for-1 share split or a 1-for-1 bonus issue, each share is reckoned to only be worth 50% of a previous share and so only to have earned 50% of previous dividends.
That -10% figure won't perfectly reflect the outcome experienced by every shareholder who went through the rights issue without adding or removing capital to the holding, but it should be pretty close.
Gengulphus
