National Grid Share Discussion Threads

[atlantic57] 22/4/2017 08:23

Standard life did something similar in 2015 I believe but they way they structured the deal shareholders had the right to decide whether it was treated as a capital transaction or a dividend. Everything I have read to date implies that in the case of Ng this is a Dividend.

The company secretary will be able to give a definitive answer as Hmrc must agree any proposals to treat it as capital.

[atlantic57] 22/4/2017 08:16

A special dividend would normally be classed in exactly the same way as an ordinary dividend.However this is slightly more unusual as the reduction in shares owned is something that is worth looking into.

The Company secretary is the best person to speak to.

[jbarker5555] 22/4/2017 00:41

Hi Misanthr,
My assertion is if there's a tax liability (ie not in sipp or isa) just sell out and take the capital gain/loss rather than spending time potentially arguing with HMRC - you can spend too much time letting the tax tail wag the investment dog!

On the other hand if you investment is in 6 figures the potential gains from arguing your case could be beneficial, if not awkward. I'd like to hear how you get on with clarifying your opinion, always interested to hear different peoples experiences.

Just to clarify I do have a holding in NG. which I have had for 3-4 years and is held in a sipp. AIMO DYOR :)

[misanthropeterence] 21/4/2017 23:16

Dear Jbarker,
You're right in so far as "trading accordingly" goes - already done that as I don't have a dog.
Let's face it though, someone has to give it a shot, and I'm currently liaising with the. company Secretary.
I maintain that this is not a dividend in the normal sense - "Special" indeed, we are to be paid for losing a chunk of the company and the proportion of the total capital value concerned is to be returnedto shareholders.If this is not a return of capital I don't know what is.
Worth chasing I reckon. I'd be interested to hear your assertion backed up more though.

[jbarker5555] 21/4/2017 21:41

I don't think I'd waste my time chancing that it could be "return of capital". I'd assume it is "income" and trade accordingly. Otherwise you could spend half a day talking to your accountant and HMRC when you could spend the same time researching new shares, or walking the dog! :) AIMO DYOR

[misanthropeterence] 21/4/2017 21:27

I'm back on the tax liability and whether the "special dividend" should be treated as "income" or "return of capital". These are treated diffently ie income is taxed as normal and return of capital MAY be liable to capital gains tax if the annual CGT allowance is exceeded. BIG DIFFERENCE !!
Check out the following link;

hxxps://help.stockbrokers.barclays.co.uk/help/event-processing/return-of-capital

[utyinv] 21/4/2017 20:00

jeffian,

R U on the wrong BB?

This is a NG BB. :~)

[bountyhunter] 21/4/2017 14:39

brexit should take care of that ;-)))))

[septimus quaid] 21/4/2017 13:30

There was an article in Today's Times giving Centrica a panning based on negative sentiment in anticipation of more government meddling.

The UK government is skint and although it has reduced deficit it has failed to reduce debt. All this, despite squeezing PAY-ers half to death with direct and indirect taxes.

The associated risk for NG, and other big energy related stocks, is being tapped for cash via some windfall arrangement. No doubt sold to a (unsympathetic and uncomprehending) public on the basis it will stop hospital closures or some such.

[jeffian] 21/4/2017 12:40

This from the Motley Fool re: dividend stocks -

"One-of-a-kind

National Grid
Sell: 1,001.50 | Buy: 1,002.00 positive 11.70 (1.18%)
Graph
Prices delayed by at least 15 minutes.
Just as G4S’s reputation will ensure that the company can continue to grow, National Grid has an existing presence around the UK that virtually guarantees the firm will be able to produce dividends for investors for decades to come.

The group owns the majority of the UK’s electricity infrastructure, which would be impossible for any competitor to replicate. With this being the case, National Grid has an enormous competitive advantage and earnings stability available to virtually no other company. As there is little risk to its earnings, the firm’s dividend is one of the most secure on the market. Shares in the company currently support a dividend yield of 4.3%, and the payout is covered 1.5 times by earnings per share."

[linhur] 21/4/2017 12:37

Surprised that xd date (22 May) is after record date (19 May). it is normally the other way round {Thursday xd, Friday record date}.

I suspect the problem is EGM day is Friday and they cannot declare a special dividend before it has been voted on.

[pierre oreilly] 21/4/2017 12:18

and stamp on the buy

[pierre oreilly] 21/4/2017 12:17

Just sell the lot just before xd, and buy back 11/12ths just after.

Same result as getting the special divi, except it shifts income to cap gains (or losses!). The cost is the dealing and spread costs.

[utyinv] 21/4/2017 11:17

Septimus,

You're right about reasons to be hacked off if your holdings were outside an ISA. I sometimes wonder if these Corporate decisions are made in the interests of the PI as it would appear decisions favour Institutional investor who work under different rules / platforms.

However, let's be honest, NG had put the writing up on the wall regarding returning proceeds to shareholders and the sale intention was first announced in Dec 2015 and if you had a sufficient holding to make a significant difference to your tax liability you would have been wise to start transferring shares into an ISA via bed and breakfast as I am sure you have. As you said, you would be hacked off if your shareholding wasn't in an ISA.

So if you hadn't used the 2015/16 allowance you could of had sqirreled away £15,240 (15/16) + £15,240 (16/17) + £20,000 (17/18) = £50,480 and if you are married £100,960 worth of National Grid shares to mitigate your tax liability.

However, the Chancellor has indicated that he is coming after affluent prudent Professionals and Pensioners who have tried to build up a nest egg in order to provide an income for now or the future by the new rules being imposed from April 2018, regarding Income from investments whether shareholding or savings. The new rules were intended to curb the practices of Directors and the self employed paying themselves in dividends rather than salary in order to minimise tax but such an action could have been more specifically targetted if that was his sole intention.

The £billions paid out in PPI is soon coming to an end and the treasury needs to find some other form of stimulus for the economy. IMO only :)

[misanthropeterence] 21/4/2017 10:54

Absolutely Septimus - hacked off to the point where I've written to the Director of Investor Relations requesting a simple explanation as to how the special dividend is, in any way, good for the small investor.
This should definitely not be treated as income, as in my case it represents a demonstrable enforced sale of my holding and resulting loss due to the tax implications. I smell a fix between the Chancellor, who stands to gain massively, the Regulator and the Company.

[bountyhunter] 21/4/2017 10:53

yes there should really be a 'B' shares alternative to cover that

[septimus quaid] 21/4/2017 10:25

With everything so tightly hedged, the impact post Brexit should have been minimal.

However, the consequential slump in exchanges rate, post Brexit, signalled the start of a mini bull run with the share price reaching an all time high on 5 July 16.

At some point, will the current hedging arrangements not start to unwind (the stock market being forward looking and all)?

Otherwise, I think this special dividend/share consolidation shenanigans is going down like a lead balloon. Swapping capital for income, I'd be really hacked off if my holding was outside an ISA.

[prewar] 21/4/2017 09:41

Not sure I buy all this strengthening of the £ vs the $, I thought NG hedged the vast majority of their investments either through issuing Debt & Equity in $, or via hedging products on the balance sheet?

[atlantic57] 21/4/2017 09:12

Septimus Quaid

Thank you !
i thought the fall before was due to the stock being regarded as a proxy bond.
It then recovered strongly when it looked like the fed will not raise interest rates aggressively after all.

[septimus quaid] 21/4/2017 08:15

Is the price fall not connected with the recent general election announcement and the strengthening of the £ against the $ (large part of NG's earnings in $s)?

[atlantic57] 21/4/2017 06:34

If I had a crystal Ball I would have sold at 10.42 and bought back.
I don't understand why the price has fallen recently as far as I am aware nothing has
Changed !

[pierre oreilly] 21/4/2017 00:20

Dogdays, Your views seem to imply that companies shouldn't pay any ordinary divis, keeping the cash to grow the company.

That is sort of against the whole idea of the stock market, where generating an income stream for its owners is one of the major aims.

Special divis are paid when companies have cash beyond their immediate and near term requirements. Seems very sensible to me.

[prewar] 20/4/2017 20:49

People will buy it from NG because they can run it more efficiently (either lower costs or lower cost WACC).

[dogdays] 20/4/2017 20:30

Gentlemen
Though I both take and understand the points that are being made,I have always personally thought that a company that is disposing of a part of its business and returning cash to the shareholders, is a company that has nowhere left to go or at least has no short term growth strategy.I would rather they held the money for future growth projects. As for gas being a difficult sector,I wonder why anyone wants to buy it from NG if its got no future potential.

[utyinv] 20/4/2017 17:40

dogdays,

As Pierre quite rightly states on the advantage of the sale being; the Company is getting rid of an increasingly costly, low return business that it doesn't want.

Very clever move, think of the pension liabilities too, the Gas Distribution Members and Pensioners - so many of them - etc etc. Are you aware that although Transco merged with Grid years ago the Gas - which was Transmission and Distribution - had and still has, separate and different pension schemes but the Electricity Pensions both DB and DC and the Gas DB and DC schemes are funded by one NG and of course the contributing members. Now I know some will say that pension costs are allowed by OFGEM well they are only to a degree and things are changing fast!

Ofgem is getting very political, trying to justify its existence and Grid like many Utilities are saying we are in business to earn a profit and if you won't let us do that in the UK we will simply go and invest where we are appreciated and can earn a good income. Utilities are not a charity but the Regulators think they are, just like the Gov think the banks are too.

Serving millions of Gas Distribution customers is costly, very labour intensive and getting increasingly hard to grow its return on investments due to the restrictions put in place by Ofgem.