Lloyds Banking Group

[monabri]

Didnt see this announcement. Apologies if I just missed the post ( I had a quick look but didn't see any mention).

https://www.londonstockexchange.com/exc ... 75842.html

16 May 2019

Lloyds Banking Group is today announcing that it will move to the payment of quarterly dividends in 2020, with the first quarterly dividend in respect of Q1 2020 payable in June 2020.

[monabri]

I see Breelander had commented on another board..missed it!

[blobby]

Thanks for the heads up. This is nice and I'd like to see more of this from other companies

[Dod101]

Thanks for the heads up. This is nice and I'd like to see more of this from other companies

If you are referring to quarterly dividends, many of the companies I am invested in pay quarterly these days.

Dod

[Makems]

For those of us retired who actually rely on dividends for our income, quarterly helps to smooth out the income flow.
With 29 shares in my HYP there isnt a month with NO income, but October is lowest % of annual dividend income and August is highest at 0.79% and 11.71% respectively.

[kempiejon]

For those of us retired who actually rely on dividends for our income, quarterly helps to smooth out the income flow.
With 29 shares in my HYP there isnt a month with NO income, but October is lowest % of annual dividend income and August is highest at 0.79% and 11.71% respectively.

For those of us reinvesting our dividends the shift to four times a year does let us get those dividends reinvested and working for us a tiny bit quicker.
My leaner months in the last year were January, February and April all at just under 5% and September came top of the pops at 15%.

[johnhemming]

Correct me if I am wrong, but looking at the March accounts I find a Shareholders Equity of 43.8bn and total shares in issue of 71.165m which to me appears that each share has an equity in the group of 61.5p.

Taking one buy back
Date of purchases: 5(th) July 2019

Number of ordinary shares purchased: 13,024,901
Highest price paid per share (pence): 58.66
Lowest price paid per share (pence): 57.74
Volume weighted average price paid per share (pence): 58.19

I would assume that Lloyds make an effective profit of about 3p on each share they buy back. (In the sense that a liability to a shareholder of 61.5p is extinguished for a payment of 58.19 (plus transaction costs).

[Gengulphus]

Thanks for the heads up. This is nice and I'd like to see more of this from other companies

I've decidedly mixed feelings about quarterly payments. In principle, I benefit from my income arriving more smoothly and might benefit from having the money earlier, so that I'm able to get it working for me sooner (*). In practice, those benefits are small and there are some admin costs associated with them - both for the company to make the larger number of payments and for me to keep my records straight - and how soon I get money working for me is at least as much driven by my schedule as by the company's...

It's also worth mentioning that shifts to quarterly payments are liable to lead to distortions in company dividend histories. I recently encountered that when preparing the tables in my post viewtopic.php?f=15&t=18247&start=100#p233768, specifically for BATS. If you look at the chart at the top of its dividend history according to dividenddata, there's apparently a big drop in 2017 followed by complete recovery and growth on top of it in 2018. But in fact, what basically happened is that the company changed its dividend payment policy, which had been to pay an interim of 1/3rd of the previous year's total, and then a final to make up the total for the year - which tended to produce a roughly 30%:70% interim:final split given the rate at which the company was growing its dividend. The change was to four equal quarterly interim dividends, so a 25%:25%:25%:25% split - but just to confuse matters further, previously the interim for a year had been paid in September and the final in May of the following year and now the quarterly interims are paid in May, August, November, and February of the following year. So the May payment used to be the final for the previous year and is now the first quarterly for the current year - which ended up meaning that 2017 was a short year in dividend payment terms, with the May 2017 payment 'belonging' to 2016 and the May 2018 payment to 2018, even though it was the normal 12 months long in accounting terms. They did adjust with an extra interim payment for 2017 in February 2018 (so 2017 was an interim year between the old and new payment policies), but that was only about 25% of the 2016 total, so the 'official' total dividend for 2017 ended up about 59% of the total for 2016 - hence the rather big drop, followed by the big recovery plus growth in 2018, a normal year under the new policy.

I did adjust for this in my post, by treating the May payments in 2018 and 2019, which were 'officially' payments for those years, as instead being payments for 2017 and 2018 respectively. But that adjustment still makes the 2017 total only about 88% of the 2016 total. So still a quite noticeable one-year-only drop - but one I think is fair, because it's saying things about shareholder dividend income as seen from the time of year a bit after the company's traditional final dividend payment for a year (but no longer is, because the company no longer pays final dividends - the main effect of which is that shareholders no longer vote to approve a dividend at the AGM). So I think that fairly viewed, the company were a bit stingy with the extra interim dividend for 2017 - about 40% rather than 25% of the 2016 total would have avoided that.

But that's only about what the company could have done to avoid the significantly-lower-than-usual year of dividend payments seen by shareholders - the 'official' dividends-paid-for-company-financial-years record would still have shown a very noticeable one-year-only shortfall, essentially because of the short 'dividend payment year'. And given the change they were making to their dividend payment schedule, I think that was basically unavoidable, other than by not making that change!

The net result is that one of the downsides I see to changes from paying dividends twice a year to quarterly is that they are liable to produce distortions in the company's dividend record - a nuisance that will make itself felt by HYPers who pay attention to dividend records for at least quite a few years to come, and possibly a great many years to come. Of course, some HYPers don't pay attention to them and will be unaffected, but there are quite a few who do!

(*) I will note that one doesn't necessarily get the money earlier. E.g. one way to view the BATS changeover is to regard not just the May quarterly payment as 'belonging' to the previous year, but also 2/3rds of the August quarterly payment. That gives a steady dividend progression from before the switchover to afterwards (148.1p, 154.0p, 169.4p, 181.43p, 198.45p for 2014-18), but if you look at when it counts the payments as having been made, it's roughly speaking replaced an interim paid in late September with 1/3rd of a quarterly paid in early-mid August plus a quarterly paid in early-mid November, while replacing a final paid in early-mid May by quarterlies paid in early-mid February and early-mid May plus 2/3rds of a quarterly paid in early-mid August. So viewed in that way, BATS gave shareholders a nicely-growing dividend but a fairly balanced mixture of paying some of it earlier, some of it at the same time as before and some of it later... Not much overall benefit there!

And looking at Lloyds similarly, its dividends have been split about 33%:67% between September interim and May final payments. The change they've announced is to a basic 20%:20%:20%:40% split between June, September, December and May if the total dividend is held, but growth (or shrinkage) affecting the 40% final only. If growth continues at around the 5% level, that would actually result in a 20:20:20:45 split, or about 19%:19%:19%:43% in percentage terms. So basically, from June 2020 onward the 33% of total that we have been getting in September can be expected to arrive split as 19% in June and 14% in September, and the 67% we have been getting in May can be expected to arrive as 5% in September, 19% in December and 43% in May. So the change Lloyds will be making really will give us the money earlier - but one shouldn't assume without checking that all switches to quarterly payments will do so!

Gengulphus

[Itsallaguess]

For those of us retired who actually rely on dividends for our income, quarterly helps to smooth out the income flow.

With 29 shares in my HYP there isnt a month with NO income, but October is lowest % of annual dividend income and August is highest at 0.79% and 11.71% respectively.

I'm still in accumulation mode, as I'm still working, but I don't plan on relying on an 'income from dividends' plan where the drum-beat of actual dividends being paid matters at all...

I plan on creating a holding account that all dividends are paid into, and then after a level of 'cash-buffer' has accrued, I plan to set up a direct-debit from that holding account of a 'monthly wage' into my normal bank account, that will allow those 'holding account' deductions to operate at a level that doesn't risk the holding account ever running out of cash. I'll probably also hold some additional level of 'emergency cash' in the holding account too, that will help with the above float.

That way, dividend-payment timings are completely irrelevant, beyond what we expect to be paid over a 12-monthly period...

Given that we've no direct control over when any company dividends are paid, and companies sometimes change both the payment-dates and the frequency of such dividend payments (as seen in this thread..), I think taking an approach that makes both of those aspects more or less irrelevant can only be a good thing, and if such a plan can be used as part of our 'emergency-cash management' plans too, then all the better....

We've seen some posts in the past where people actively seek out a particular income-investment that might pay dividends in a particular month, and I think there are far more important aspects to consider when looking for homes for our investment capital, and so coming up with a cash-management strategy that removes such 'particular month' dividend-requirements might be a better way to approach this issue...

Cheers,

Itsallaguess

[Gengulphus]

I would assume that Lloyds make an effective profit of about 3p on each share they buy back. (In the sense that a liability to a shareholder of 61.5p is extinguished for a payment of 58.19 (plus transaction costs).

The 61.5p per share is not a liability to shareholders - the company is not liable to pay it to them. It is just an accounting estimate of what the company could pay to shareholders if it realised all its assets in a controlled way (in particular, without depressing the market for them), paid off all its liabilities and didn't acquire any new assets. This is something which is extremely unlikely to happen - if they continue in business, they'll only realise the assets in the normal course of that business, which certainly won't involve realising the lot without replacing them, and if they don't, the chances of them realising all the assets in a controlled way are pretty remote...

So another way of looking at it is that they make an effective loss of 58.19p (plus transaction costs) on each share they buy back, since they're extinguishing an accounting fiction for a payment of that amount!

But I don't think either of those ways of looking at it is a productive one for shareholders...

Gengulphus

[johnhemming]

Although they don't account for it as a profit in terms of accounting, the net equity per share goes up.

[Gengulphus]

Although they don't account for it as a profit in terms of accounting, the net equity per share goes up.

Yes - the amount of the accounting estimate goes up - but it's still not a liability. And if one were to take the alternative way of looking at things I mentioned, it's just as much an accounting fiction as before...

Gengulphus