tramrider wrote:I took up the rights issue in full last Easter. While the yield per share has gone down, the total amount of dividend paid on the new total number of shares is up a little on both the last final and the coming interim. That may be how they justify the change.
Except that we
know from the interim results how they justify the change! It's by saying the change is according to their current dividend policy:
"
As previously announced, the Group's policy is for the dividend to be covered 2.0x by earnings. Reflecting this, the directors have declared an interim dividend of 23.0p per share (H1 2018: 28.0p), based on pre-exceptional earnings, which will be paid on 10 April 2019 to shareholders on the register at close of business on 15 March 2019."
One might regard it as a good justification or a poor one, but they've been quite clear about what their justification is...
Also, if they had been justifying the dividend reduction on the basis of the rights issue, there's an absolutely standard way of doing so, which is roughly (*) based on the position of someone who 'tail swallows' (sells enough rights for the sale proceeds to fund taking up the rest) and so doesn't either put capital into the holding (as you have done) or take it out (either actively, by selling the rights, or passively, by letting them lapse). That's basically the only like-for-like way of comparing dividends before and after a rights issue, since increasing one's dividend income by putting capital into the holding or decreasing it by removing capital from the holding is something any shareholder can do at any time, rights issue or no rights issue - all they have to do is buy or sell shares!
Interestingly, the interim report says that the interim dividend drop was from 28p to 23p and a fall of 18%, and the interim dividend per share last year was indeed 28p - i.e. the 28p figure is not adjusted for the rights issue. Looking carefully at the interim results, I see that it said earnings figures had been adjusted for the rights issue, but nothing similar about dividends - which seems rather odd. Checking the dates, the critical date for last year's earnings figures was the end of the half year, i.e. December 31st, 2017, the critical date for last year's dividend figures was when the interim dividend went ex-dividend, i.e. March 15th, 2018, and both of them precede the shares going ex-rights on March 28th, 2018. I.e. the 28p figure is for pre-rights issue shares, and the 23p for post-rights issue shares, and so I would normally have expected the standard adjustment for a rights issue to have been done.
The interim results do describe the adjustment to earnings with "
The weighted average number of shares used for the half year to 31 December 2017 in the calculation of earnings per share information shown in the table below has been restated by adjusting those previously reported by an adjusting factor of 0.11147 to reflect the bonus element in the shares issued under the rights issue which completed on 16 April 2018." and the same adjustment would apply to dividends: it basically means that dividend per share figures from before the rights issue should be divided by 1.11147% to get a like-for-like comparison with figures from after the rights issue. That reduces the 28p comparative figure to 25.19p (which incidentally agrees with
dividenddata's figure), so that the reduction from 25.19p to 23p is about an 8.7% drop.
Or more simply, a tail swallower will see a ~9% drop in their interim dividend payment from last year, as the combined result of a ~18% drop in dividend per share but a ~11% increase in their number of shares due to the tail-swallowing.
I can only guess why the company didn't do that completely standard adjustment and claim a 9% reduction rather than an 18% one in their interim results. My best guess is that having switched to a policy of making dividends be determined by earnings and not deliberately raised or cut by the directors, they didn't really care all that much any more about what the percentage drop was...
(*) It's got to be roughly, because exactly how a tail-swallower's holding is affected depends on exactly what price they manage to sell their rights for.
Gengulphus
