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BHP special dividend

Practical discussions about equity High-Yield Portfolios (HYP) for income
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bluedonkey
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BHP special dividend

#197846

Postby bluedonkey » January 31st, 2019, 9:52 am

The BHP special dividend arrived this week. I've treated it as income rather than return of capital. What have others done?

Darka
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Re: BHP special dividend

#197849

Postby Darka » January 31st, 2019, 9:55 am

I record it as a special dividend in my spreadsheet rather than a dividend so that it doesn't distort my actual dividend income for the year, and can be totalled separately.

IanTHughes
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Re: BHP special dividend

#197853

Postby IanTHughes » January 31st, 2019, 10:07 am

bluedonkey wrote:The BHP special dividend arrived this week. I've treated it as income rather than return of capital. What have others done?

I treat is as a Return of Capital, not income.


Ian

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Re: BHP special dividend

#197856

Postby StepOne » January 31st, 2019, 10:19 am

Income.

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Re: BHP special dividend

#197857

Postby mike » January 31st, 2019, 10:21 am

Income, but totally ignored in yield calculation and estimated future dividends.

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Re: BHP special dividend

#197865

Postby raythekiwi » January 31st, 2019, 10:32 am

Capital for me since it made the company smaller. As when they spun off S32.
Cheers, rtk

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Re: BHP special dividend

#197903

Postby daveh » January 31st, 2019, 12:04 pm

Treated as income with a note that it was a special. HMRC would treat it as income (if it wasn't in my ISA) so I need to treat it as income in my spreadsheet. The IHG special is also treated as income and that one isn't in my ISA so counts towards the £2000 allowance. Fortunately the IHG holding is small so it won't take me over the £2000 point. If BHP wasn't in my ISA it would cause me problems as that is an almost full holding.

However I do have a quandary with what to do with the cash even though I'm treating it as income in my spreadsheet it is in one sense the return of a bit of the company (though there isn't an accompanying consolidation) so maybe I should reinvest it back into BHP. It is sufficient that I could reinvest it back into BHP on a cheap dealing day. I'm tempted as BHP are still on a good yield, but they are well down in the top up list (26th place) on my HYPTUSS. I have additional divis to reinvest so I may go with a Vod top up or I may top up a HY ETF.

top 8 are:
1   VOD
2 MKS
3= S32
3= GFRD
5 DC.
6 BP.
7 RBS
8= LLPC
8= WMH


Decisions, decisions!

idpickering
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Re: BHP special dividend

#197911

Postby idpickering » January 31st, 2019, 12:28 pm

I've just let it sit in income, pending being invested into BATS and another share next month.

Ian.

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Re: BHP special dividend

#197919

Postby kempiejon » January 31st, 2019, 12:40 pm

daveh wrote:Treated as income with a note that it was a special. HMRC would treat it as income (if it wasn't in my ISA) so I need to treat it as income in my spreadsheet. The IHG special is also treated as income and that one isn't in my ISA so counts towards the £2000 allowance. Fortunately the IHG holding is small so it won't take me over the £2000 point. If BHP wasn't in my ISA it would cause me problems as that is an almost full holding.

However I do have a quandary with what to do with the cash even though I'm treating it as income in my spreadsheet it is in one sense the return of a bit of the company (though there isn't an accompanying consolidation) so maybe I should reinvest it back into BHP. It is sufficient that I could reinvest it back into BHP on a cheap dealing day. I'm tempted as BHP are still on a good yield, but they are well down in the top up list (26th place) on my HYPTUSS. I have additional divis to reinvest so I may go with a Vod top up or I may top up a HY ETF.

top 8 are:
1   VOD
2 MKS
3= S32
3= GFRD
5 DC.
6 BP.
7 RBS
8= LLPC
8= WMH


Decisions, decisions!


I say VODafone fails on cover, MarK&Spencer static for 4 years, S32 no dividend, GalliFoRD Try cut, so Dixons or BP perhaps? Royal Bank of Scotland no dividend, LLPC preference share, WilliaMHill perhaps. I'd say BP would be my fav from that list.
I'm probably going to add mine into Microfocus as it's still undersized in my portfolio. I do see the logic in investing it back into the donor though, it would fail my dividend growth test as they slashed the income in 2016.

tjh290633
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Re: BHP special dividend

#197940

Postby tjh290633 » January 31st, 2019, 1:38 pm

Where did you get the idea that S32 doesn't pay a dividend?

It paid an interim of 3.09p and a special of 2.15p on 5th April 2018 and a final of 4.77p on 11th October 2018. Last year the interim announcement was made on 15th February, so keep your eyes open in a fortnight's time.

TJH

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Re: BHP special dividend

#197947

Postby kempiejon » January 31st, 2019, 1:58 pm

tjh - you are right, it's not one I hold so checked the yield on shares.telegraph.co.uk where they show it having zero yield. Another reminder that these information aggregators make mistakes.

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Re: BHP special dividend

#197975

Postby daveh » January 31st, 2019, 3:13 pm

kempiejon wrote:
I say VODafone fails on cover, MarK&Spencer static for 4 years, S32 no dividend, GalliFoRD Try cut, so Dixons or BP perhaps? Royal Bank of Scotland no dividend, LLPC preference share, WilliaMHill perhaps. I'd say BP would be my fav from that list.
I'm probably going to add mine into Microfocus as it's still undersized in my portfolio. I do see the logic in investing it back into the donor though, it would fail my dividend growth test as they slashed the income in 2016.


Yes that is my worry with Vodophone too - is the dividend sustainable, but at the present price and the massive dividend even a substantial dividend cut of upto 50% would leave them yielding >market yield and have they not reiterated that the dividend will at least be held this year? Still not an ideal purchase if there is a significant risk of a cut.

Yes MKS has regularly been in the top 3 of my HYPTUSS for what seems like years. I've not bought, not because of the static dividend, but because I worry about the sustainability of the dividend with the competition in the retail sector.

S32 as TJH says has been paying a very nice dividend and I have already topped up a couple of times from the small holding I originally got from BHP.

Dixons I recently topped up and it promptly cut its dividend

GFRD is only high in the top up list due to capital depreciation. I'm waiting to see how it copes with AWPR fallout before I buy more.

BP is tempting as is William Hill, but I'd like to see how WMH copes with the change in max stake for FOBTs and with its rollout in the USA.

I'll make no comment about LLPC here as it is a Pref share (I quite like LLOY which I also own, but its down the list in HYPTUSS as I topped it up recently and I'm also pushing 14% in financials overall so I've not got much space for more financial shares, theoretically I could go upto 20% in the financials super sector)

RBS has restarted the dividend paid 2p per share last time, which on my RBS holding gave me enough income to by a pint! HYPTUSS has a forward yield of 5.4% for RBS , but I'd prefer LLOY over RBS.

I could buy something new such as Marstons or Greene King.

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Re: BHP special dividend

#198079

Postby BobGe » February 1st, 2019, 3:40 am

raythekiwi wrote:Capital for me since it made the company smaller. As when they spun off S32.

AFAIUI, both are 'income' for UK tax purposes.

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Re: BHP special dividend

#198082

Postby Arborbridge » February 1st, 2019, 7:21 am

BobGe wrote:
raythekiwi wrote:Capital for me since it made the company smaller. As when they spun off S32.

AFAIUI, both are 'income' for UK tax purposes.


HMRC tax purposes are not, though, the same as HYP record keeping purposes. The the latter we need avoid any attribution which might give a false picture, either for looking back, or looking forward.

It would be nice to hear what Stephen Bland would rule, since last week he did so on the case "with consols" but this is, I'm told, "without consols". When it comes to HYP behaviour, Pyad is surely the benchmark?


Arb.

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Re: BHP special dividend

#198086

Postby idpickering » February 1st, 2019, 7:46 am

I agree Arb. PYAD is definitely the bench mark. If I hadn’t read his opening articles on HYP I wonder if I’d ever have heard of this style of investing. It’s the only way that makes sense to me, so I’m glad I did.

Ian.

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Re: BHP special dividend

#198120

Postby pyad » February 1st, 2019, 10:50 am

Arborbridge wrote:
BobGe wrote:
raythekiwi wrote:Capital for me since it made the company smaller. As when they spun off S32.

AFAIUI, both are 'income' for UK tax purposes.


HMRC tax purposes are not, though, the same as HYP record keeping purposes. The the latter we need avoid any attribution which might give a false picture, either for looking back, or looking forward.

It would be nice to hear what Stephen Bland would rule, since last week he did so on the case "with consols" but this is, I'm told, "without consols". When it comes to HYP behaviour, Pyad is surely the benchmark?


Arb.


There's no rule for this situation because it will vary according to the individual HYPer's view. As you say, the tax treatment which makes this payment div income like any other does not necessarily have to be followed within the investor's own records.

If you want some sort of rough guide I'd say that specials accompanied by a share consolidation are more like capital because they in effect are a forced sale of part of the holding. But specials without, like this BHP payment, are income though exceptional income. But that's just my view, there's no mandatory rule on how an investor shows this in their own records, that's personal to each individual.

Another point connected loosely with this is the use of the div cash in either reinvesting or withdrawing. Again that depends on the individual's personal situation but that decision should be made irrespective of whether it is treated as income or capital in their records. My suggestion is that all cash released from an HYP is reinvested, whatever the source, (eg. normal divs; specials with or without consols; lapsed rights; bids etc.) to the extent that it is not required to be withdrawn.

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Re: BHP special dividend

#198125

Postby Arborbridge » February 1st, 2019, 11:01 am

Thanks for the response, Pyad.

For myself, it'll be recorded as income (i.e. to add to my pensions flow if necessary), but I won't include it if and when I review dividend growth for BHP assuming it is just a windfall. The only case I include specials for that purpose are in the case of Admiral.

Arb.

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Re: BHP special dividend

#198128

Postby pyad » February 1st, 2019, 11:17 am

Arborbridge wrote:Thanks for the response, Pyad.

For myself, it'll be recorded as income (i.e. to add to my pensions flow if necessary), but I won't include it if and when I review dividend growth for BHP assuming it is just a windfall. The only case I include specials for that purpose are in the case of Admiral.

Arb.

Yes, for the purposes of considering the expected yield and longer term trend from BHP for HYP investment purposes, this special should not be included. Same with any special except maybe the sort of regular "specials" like Admiral delivers. But that latter situation is quite rare whereas "normal specials", if that's not an oxymoron, are not uncommon, scattered amongst the holdings in a large portfolio.

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Re: BHP special dividend

#198134

Postby Snorvey » February 1st, 2019, 11:34 am

With all this BHP dividend chatter I thought I'd better check in to my account and see what was going on.

Well that's a nice surprise on a chilly morning (although it distorts the normal January income figures somewhat).

Cheers BHP!

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Re: BHP special dividend

#198144

Postby monabri » February 1st, 2019, 11:58 am

BHP refer to it as a special. Indeed, the title of the posting is "BHP special dividend". However, It does look like it's a return of capital.

The real question for me is what do I put on the tax return as my shares in BHP are held in a non-ISA account. How much hassle/cost am I going to be prepared to go through with if HMRC decides to challenge my view that it is a capital return, especially when the company is calling it a special dividend? (How much tax will I pay on the the special ?).

So, I'm going to treat it as income to reinvest elsewhere.

https://www.londonstockexchange.com/exc ... 05227.html

"BHP successfully completes US$5.2 billion off-market buy-back of BHP Group Limited shares and announces US$1.02 per share special dividend"


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