British American Tobacco Dividend Declaration

[idpickering]

Second Interim Dividend for the year ending 31 December 2017

The Board of the Company has declared a second interim dividend of 43.6 pence per ordinary share of 25p for the year ending 31 December 2017. The second interim dividend will be payable on 8 February 2018 to shareholders registered on either the UK main register or the South Africa branch register on 29 December 2017 (the record date).

https://www.investegate.co.uk/british-a ... 00103577Y/

[Julian]

Quick off the mark as ever. Thanks Ian. I was hoping there would be a post today that I could attach my question to.

For me BATS is a share that is in an extremely awkward transition phase this year, from interim + final to 4 x Quarterly payments which plays havoc with my forecasting spreadsheet. I have no concerns about the holding and have absolutely no intention whatsoever of selling (in case anyone might have thought that) but the disruption that it's creating in my forecasting spreadsheet is bugging me. Apart from that I welcome the move, quarterlies smooth the cash flow into my income collection account and reduce the strain on my float.

At least the post that Ian linked to now gives us all 4 planned payment dates this year - 8-Feb, 9-May, 8-Aug and 15-Nov (and it also gives 12-Feb 2019 as the payment date for the first divi that has a pay date in 2019) but as for what forecast to assign for each quarterly this year I am somewhat at a loss. For shares maintaining the same frequency it's easy, I simply update whichever dividend was paid the previous year to reflect the new value and then my forecast for the annual dividend becomes just-declared-dividend-amount + actual amounts paid for all other dividend payment in the previous year. The trouble is that this year (soon to be the previous calendar year in 27 days time) had a final of 118.1p on 4-May and 56.5p interim on 28-Sep but I have absolutely no reliable history of quarterly payment amounts go on.

The best I've managed so far is to calculate the total dividend last year, 56.5p + 118.1p = 174.6p. That total gives a yield of 3.64% and forms a reasonable progression from previous calendar-year totals hence talking about it as an interim (which Stockopedia also does incidentally) sort of works but technically this quarterly of 43.6p is the second interim for this BATS financial year so that 56.5p paid about 3 months ago was the first interim. Already I'm in waters that I find slightly unsettling for quarterly payout patterns since, at least from the shares I hold and follow, the first three quarterlies of a financial year are usually the same and the 4th often bigger where the board adjusts it depending on what it thinks is prudent for the total annual dividend.

If I were to take 43.6p as the new normal for all quarterlies then 4 x 43.6p would give an annual payout of 174.4p which is exactly what the total is/soon-to-be-was in 2017 calendar year. I think that is unlikely (4 x flat quarterlies going forward) but it's possible I suppose and it's interesting how the arithmetic works out.

If I leave this September's 1st quarterly at 56.5p (i.e. I am assuming that Sep-2018 quarterly will be paid at the same level) and then assume 43.6p for the 2 other quarterlies to be paid in 2018 but not yet declared I get 187.3p as my total annual payout which would be an increase of 7.4% which seems too high to me.

I think the only thing that I can safely do, since I am a conservative forecaster, is assume that all future quarterlies will be 43.6p hence my forecast for next year's BATS divis is 0% growth and then treat any declaration above that amount as a nice surprise.

Has anyone else been grappling with this particular what-to-forecast issue? If yes then what have you decided to do?

For the record I don't like using broker forecasts, I prefer to only use actual declared values and sometimes factor in a personal assessment of almost certain future cuts (i.e. if an interim is rebased then a final almost certainly will be especially if management's hints at it and the same for final rebasing & interim prospects).

Edit: I just looked at the stockopedia totals for previous FINANCIAL years and, although 2017 calendar total was 174.4p, the last closed BATS financial year paid out a total of 169.4p so from a financial year perspective 174.4p would actually be a reasonable increase in dividends. But then again the first quarterly for this year has already paid out at 56.5p so to hit 174.4p for the current BATS financial year one of the two unannounced quarterlies would actually have to be less than 43.6p. Yup, I'm still pretty lost and twisting in the wind on this one.

- Julian

[idpickering]

You're welcome Julian. All I do with my dividends is log them when they get paid, although I do know what I'm getting in Jan and Feb next year. I don't fret about things much beyond that, and respect the fact that you do. No doubt someone will be along to help you soon.

Regards,

Ian.

[tjh290633]

I found that both calendar year and fiscal year calculations were affected by timing issues. Now and then a dividend would be brought forward or delayed to take advantage of tax changes. Consequently I work on company financial years, which is fine until they change the year end.

I keep a rolling 12 months list of dividends expected, listing expected dates for announcement, XD and payment, number of shares held, dividend per share and monetary amount of the dividend. Then I have columns for dividends announced, paid, and an expected cumulative total. I update it as dividends are announced and, every so often, I check the cash balance at my broker and add one to the year in the dates for those paid. I then sort by payment date, so that they move to the bottom of the list. That way I have my rolling forecast, based on dividends announced and those paid in the previous 12 months.

I use background colour to indicate increases, decreases, passed dividends and those where the conversion rates have yet to be announced. No colour if unchanged or yet to be announced.

TJH

[jackdaww]

i just count my money every day - including the divis.

[Dod101]

Julian could simply abandon trying to do forecasts. What benefit is derived by them anyway? However if for some reason I needed to make a forecast (what is all this business about Strategic Ignorance?) I would just use the current year, or in the specific case, 43.6p. per quarter. It is probable that they will do that for three quarterlies and maybe a bigger final. That would surely be a norm.

After Imps made the change a couple of years ago they had not the last time I looked got the hang of it, and in effect declared an interim and a final but adjusted the payments to paying half the interim per quarter and the final over the other two quarters.

What I do is check weekly on dividends due and log them as they are paid. I could not be bothered trying to do anything else.

Dod

[Julian]

Julian could simply abandon trying to do forecasts. What benefit is derived by them anyway? ...

Some huge benefits, at least for me. Firstly without an estimated monthly divi forecast I have absolutely no way to know what I should set the float at in my income collection account in order to maintain the annual minimum that I want. Secondly I have no way of knowing, for the float I currently have, how much I could increase my monthly extraction level (aka salary) whilst maintaining my required minimum. Thirdly I don’t have an easy way to immediately see the effect on my monthly cash flow from some nasty divi rebasement. I could go on with more of the benefits that I see but as a final benefit to me it means that I don’t have to check every dividend coming in for broker error, I can check all my dividends at once against forecast simply by looking at the movement in my float over whatever period I want to monitor dividends for.

Yours is an interesting post Dod because frankly I’m as perplexed by your disdain for forecasts as you seem to be for my focus on doing one(*) and sharing views is one of the nice things about this forum so your seemingly diametrically opposed view to mine is most interesting. I simply can’t imagine anyone running an HYP without doing my sort of forecast.

Actually, I’ll correct that last sentence because it contains a bias that might be relevant. I can’t imagine anyone running an HYP in live-off mode without doing my sort of forecast. If in building mode I can certainly see your point of view.

After Imps made the change a couple of years ago they had not the last time I looked got the hang of it, and in effect declared an interim and a final but adjusted the payments to paying half the interim per quarter and the final over the other two quarters. ... I would just use the current year, or in the specific case, 43.6p. per quarter. It is probable that they will do that for three quarterlies and maybe a bigger final. That would surely be a norm.

The Imperial Brands transition strategy seems to me to be way more sensible. I had no problem accommodating that one into my spreadsheet. BATS have boxed themselves into a corner because they can’t do what you have suggested, they have already declared a 1st interim of 56.5p so unless they’re confident that they’ll be able to announce a real inflation-busting divi this BATS FY the final will need to stay at 43.6p (no big deal I suppose). In fact unless they are comfortable with announcing a 7.4% increase this FY the final will need to be below 43.6p which does seem quite wrong to me. Dare we dream that they are so confident in this year’s numbers that we have today just seen them lock in a minimum of 7.4% increase in dividend for this year?

- Julian

(*) I know it was an amicable comment by the way, my use of the word “disdain” was for brevity and emphasis and not intended to indicate that I inferred any hostility in your comment.

[Julian]

i just count my money every day - including the divis.

I trust you’ve built a suitable counting house in which to do this. If it hasn’t already been designated as your inventing shed then a garden shed would fit the bill

- Julian

[moorfield]

I think the only thing that I can safely do, since I am a conservative forecaster, is assume that all future quarterlies will be 43.6p hence my forecast for next year's BATS divis is 0% growth and then treat any declaration above that amount as a nice surprise.

Julian - This is my approach too for the next year and until the first four quarterlies have been declared.

[monabri]

JD, Obviously this is your role model!

https://youtu.be/96rC4X_KWl4

[Dod101]

Julian

I will not quote from your post. Thanks for it though. It is at least as interesting as mine I am sure. I guess I am somewhat disdainful (maybe dismissive would be better?) I live off my investments and draw more or less the same each month to live off. I too have a collection bank account which contains a float. Sometimes I need to draw more (such as for a horrible £945 account for 2000 litres of oil which I just paid for!) and sometimes less but over the year it works out pretty much as expected. I am really quite casual about it. I now live on my own but even with a wife who expected more certainty it simply would not have occurred to me to forecast my likely income. I just assume it will not be less than the year before. For 2017 with just a few dividends to come in it will the highest it has ever been (and I have put no new money in for a long while)

Anyway, back to the topic. Not much doubt about the payment on 8 Feb 2018. It is to be 25% of the total cash dividend paid in 2017 which as you said will be 43.65p. The BAT announcement then says the dividend for 2017 will be announced with its results in Feb 2018 and will be paid over 4 quarters, 9 May, 9 Aug, 15 Nov and 7 Feb 2018. That does not make a lot of sense but you are right the second interim payable in February 2018 has rather confused the situation although it is intended to help. I think I would just spread the 2017 dividend overthe four quarterly payments due in 2018, including the one on 8 Feb. You say you are conservative. That is probably the most conservative way to do it and you may get a pleasant surprise.

Dod

[pendas]

Like Dod101, I make no forecasts but then the income is mainly for exceptional capital expenditure like a new car. Day to day expenditure is covered by pension income.

Dividends are recorded as they are received and I expect the income to increase year on year as they are mostly reinvested.

[Arborbridge]

Julian could simply abandon trying to do forecasts. What benefit is derived by them anyway?

What I do is check weekly on dividends due and log them as they are paid. I could not be bothered trying to do anything else.

Dod

Well each to his own. About this time of year I do make a forecast, and also set my "salary" for the following year according to inflation. It's comforting to know the two are in reasonable alignment - or preferably that the forecast dividends are increasing faster than my salary. It's just the way I am - I prefer to have some sort of view of what is going on in my financial life and what the restraints may be.

And it's really know bother. Haven't you discovered the HYPTUSS? Press a button and most of it is done for you - although you'd be wise to spend a minute or two looking for funnies, if there are any. I'd guess with your type of company, there probably would be scarcely any.

[tjh290633]

I've tried several times to reply, but got bounced out each time. It seems to be a problem with mobile phones.

The BATS dividend in 2016 was Interim 51.3p and a final of 118.1p. Now for 2017 we had the first interim of 56.5p and a second interim of 43.6p. Logic suggests that the final should be about 75p, but will it be?

We shall know in February, but that's a little late for forecasting.

TJH

[idpickering]

We shall know in February, but that's a little late for forecasting.

TJH

I do like Arb's way of doing things, because it is nice to know I guess. But in relation to your comment above Terry, I'll worry about it then,

Ian.

[StepOne]

BATS said last April;

The dividend amount will be announced as part of the Preliminary Results announcement for the year ending 31 December 2017 in February 2018 and will be paid in four equal instalments in May 2018, August 2018, November 2018 and February 2019

Forecasts are for 185p for the year, so we should get 4 equal payments of roughly 46p. The payment just announced for February is a wee bonus ;

As part of the transition to quarterly dividend payments, and to ensure shareholders receive the equivalent amount of total cash payments in 2018 as they would have under the previous payment policy, an additional interim dividend will be announced in December 2017 for payment in February 2018 and will be calculated as 25% of the total cash dividend paid in 2017.

StepOne