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Intercontinental Hotels Grp Finals

Practical discussions about equity High-Yield Portfolios (HYP) for income
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daveh
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Intercontinental Hotels Grp Finals

#33315

Postby daveh » February 21st, 2017, 8:47 am

Can be found here:
www.investegate.co.uk/article.aspx?id=2 ... 3743X&fe=1


Shareholder returns demonstrating confidence in future growth prospects

- Proposed 11% increase in the final dividend to 64.0¢, taking the total dividend for the year up 11% to 94.0¢, reflecting our confident outlook on our ability to continue delivering sustainable growth into the future.

- Proposed $400m special dividend with share consolidation, equating to 202.5¢ per share.

Dates for both dividends
Ex-dividend date: 4 May 2017
Record date: 5 May 2017
Payment date:22 May 2017
The corresponding amount in Pence Sterling per ordinary share will be announced on 11 May 2017, calculated based on the average of the market exchange rates for the three days commencing 8 May 2017.

I can't find any info on the share consolidation, I assume it will be announced together with the sterling info.

Not a HYP share these days, but I hold from my original purchase of Bass, which became six continents and then split into IHG and MAB.
IHG keep reducing my shareholding with all these specials - its performed very well for me, but at some stage I may need to sell before the holding gets too small.

Bouleversee
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Re: Intercontinental Hotels Grp Finals

#33355

Postby Bouleversee » February 21st, 2017, 10:51 am

Daveh -

I'm in exactly the same boat. I read somewhere (can't remember where) that they would be returning cash by share buyback and cancellation rather than special dividend this time but that was clearly wrong.

daveh
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Re: Intercontinental Hotels Grp Finals

#33488

Postby daveh » February 21st, 2017, 4:39 pm

Bouleversee wrote:Daveh -

I'm in exactly the same boat. I read somewhere (can't remember where) that they would be returning cash by share buyback and cancellation rather than special dividend this time but that was clearly wrong.


I prefer the special to buybacks as I get to decide what to do with the money (I'll almost certainly invest it in a higher yielding share). Theoretically there should be no difference between a special with or without a consolidation. The advantage for the company is that with fewer shares in issue the cost of the normal dividend will be less.

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Re: Intercontinental Hotels Grp Finals

#33616

Postby Gengulphus » February 21st, 2017, 11:25 pm

daveh wrote:... Theoretically there should be no difference between a special with or without a consolidation. ...

But not in practice, I'm afraid. The difference is one that shows up when you assess the company's dividend record from the point of view of how much dividend income you actually receive. For a special without a consolidation, your future income goes up by the same percentage as the dividend per share; for a special with a consolidation, there's an adjustment by the consolidation ratio (which can typically be roughly reversed by reinvesting the special in the shares, but then you no longer have the special...).

Of course, with the company having fewer shares to divide the available pot of dividend cash between, the dividend per share ought to go up by more than it would if the special had been paid without a share consolidation. But whether it actually does is something that needs checking - and even if it does, one needs to beware of the 'spin' special dividends with share consolidations produce, that the company has a high dividend growth rate and is paying specials. If one actually looks at the practical effect in terms of spending money arriving in your bank account, that "and" should be "or" - you'll have the high dividend growth rate if you reinvest the special in the holding, or the bonus income from the special if you don't.

To illustrate that, here's the last 5 years of IHG dividends as declared by the company and as actually received by HYP1 (which has reinvested the specials-with-consolidations in other holdings and so does not count them as income, though there was one special-without-consolidation that was not reinvested and was counted as income). Dividend per share figures are from the company website (see https://www.ihgplc.com/en/investors/shareholder-centre/dividends), HYP1 figures from pyad's yearly reports (*). The table is complicated by the fact that HYP1's years are offset from company years - HYP1 receives one company year's final and the next one's interim in each of its years:


That is by no means a bad income record, but the dividend-per-share growth flatters it. In particular, HYP1's dividend-per-share CAGR in that table is 13.3%, while its dividend income CAGR is 7.4%. That's quite a difference when looked at over the long term, e.g. over 10 years, a 13.3% CAGR will multiply income by about 3.5, a 7.4% CAGR only by about 2. In addition, it should be remembered that both figures have benefited significantly from last year's exchange rate change, which is responsible for very roughly a quarter of the 13.3% figure and half the 7.4% figure.

Personally, the attitude I take towards specials-without-consolidations is that they're a bonus, and generally not one that's expected to be repeated (though there are exceptions such as Admiral). Specials-with-consolidations are instead pretty much the equivalent of a top-slicing tinker, apart from being compulsory (whereas tinkering is by definition voluntary selling) and the different tax treatment if the shares are held outside a tax shelter. In particular, both a special-with-consolidation and a top-slicing tinker leave you with fewer shares, more cash and the problem of what to do with that cash, and if the consolidation ratio is chosen in the normal way, the amount of cash you gain will be roughly what you would have got by selling the number of shares you lost.

(*) Pyad's HYP1 reports for 2012-2015 are still available on the TMF boards, but might not be for much longer, as the three months we were promised in November are up. I've therefore archived them on the Wayback Machine, along with a lot of other HYP1/CHYP1/GDHYP/etc material. Links to the archived copies, plus his TLF 2016 report for completeness, are:
2012: https://web.archive.org/web/20121120231529/http://boards.fool.co.uk/hyp1-is-12-12684925.aspx?sort=whole
2013: https://web.archive.org/web/20140930212316/http://boards.fool.co.uk/hyp1-is-13-12922886.aspx?sort=whole
2014: https://web.archive.org/web/20141201000628/http://boards.fool.co.uk/hyp1-is-14-13117396.aspx?sort=whole
2015: https://web.archive.org/web/20161112150011/http://boards.fool.co.uk/hyp1-is-15-13293278.aspx?sort=whole
2016: https://www.lemonfool.co.uk//viewtopic.php?f=15&t=432

Gengulphus


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