# Dividends



## Daddy (20 Feb 2008)

AIB have announced a final dividend of almost 52cents a share.

If I take this in cash is it paid out net of 20% tax i.e i receive almost 42cents a share.

Thanks


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## Daddy (20 Feb 2008)

Found that 20% withholding tax is deducted.

Shares go ex dividend next Wed 27th Feb.

So if I buy before that date I get the dividend I think.

If I wanted to sell my shares on Thursday 28th Feb will I still be entitled to get the dividend cheque ?


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## snowdrop (20 Feb 2008)

I have another query re dividends:

First time share investor in the last week - among which I bought AIB shares for long term value I hope.

This may be a stupid question but . . .
when in 2008 is the dividend for 2007 paid and would I get it even though I didn't hold shares at the 31st december 2007 but would presumably hold them at that 2008 date?

By the way, does anyone know if there is an equivalent book  'Investing in Shares for dummies?' ie beginners guide?

Thanks for any advice.


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## Protocol (20 Feb 2008)

*Dividend*
The Board is recommending a final dividend of EUR 51.2c per share payable on 23 April 2008 to shareholders on the Company’s register of members at the close of business on 29 February 2008. The final dividend, together with the interim dividend of EUR 27.8c per share, amounts to a total dividend of EUR 79.0c per share, an increase of 10% on 2006


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## ClubMan (20 Feb 2008)

Daddy said:


> If I take this in cash is it paid out net of 20% tax i.e i receive almost 42cents a share.


Remember that dividends are assessable for income tax so if you pay 41% normally then you are still liable for the additional 21%.


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## Daddy (20 Feb 2008)

Thanks for the replies - all clear.


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## money man (20 Feb 2008)

what is the tax treatment of dividends if you take the scrip option where you get additional shares instead of income?can you do this with AIB? it would be great if they could be assessed when they are sold as fully liable to cgt rather than every year as income


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## DrMoriarty (20 Feb 2008)

It would indeed, but I'm afraid that's not the case. You are assessable to income tax on the value of the new shares (and any residual entitlement) in the same way as if you received a cash dividend. The only advantage of DRIP schemes is that they enable you to increase your holding without incurring dealing costs.


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## ClubMan (20 Feb 2008)

DrMoriarty said:


> The only advantage of DRIP schemes is that they enable you to increase your holding without incurring dealing costs.


Well - usually *lower *rather than *no *dealing costs as far as I know. For example _Vodafone DRIP _charges _UK SD _of 0.5% and a transaction charge of 0.5% if I recall correctly.


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## DrMoriarty (20 Feb 2008)

Sorry; by dealing costs I meant stockbrokers' fees. Stamp duty is still chargeable, and some DRIP schemes may also impose a transaction charge.


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## Daddy (20 Feb 2008)

Just to be clear:

If I take the AIB dividend in April as extra shares and retain the shares for several years am I supposed to pay up the tax of 21% on the difference this year and not when I sell them eventually.


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## DrMoriarty (20 Feb 2008)

Yep. It's income this year, so should be declared (and the tax paid) at the end of the tax year, on your Form 12 if you're a PAYE taxpayer.


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## Daddy (20 Feb 2008)

Thanks Doctor.

Must remember then that when I go to sell the shares I will already of paid my tax on that element of shares given to me as dividends.


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## ClubMan (20 Feb 2008)

I don't understand your point. When you sell the only relevant tax is _CGT_ (based on the disposal price less the market price at the time of acquisition etc.). This has nothing to do with income tax (e.g. on dividends).


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## Jimbojones (20 Feb 2008)

Just to confirm to snowdrop, anyone holding shares in a company on the declared date is entitled to the dividend, anyone purchasing  shares between this date and the date the shares go ex dividend will also be entitled to the div. The common time frame would be declare April, go ex div June and pay the dividend in July. The share price would typically reduce by the dividend amount once it goes ex div.


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## demoivre (20 Feb 2008)

Jimbojones said:


> The share price would typically reduce by the dividend amount once it goes ex div.



..which is something the op should bear in mind if he plans on selling as soon as they go ex div. If this is a "quick buck" strategy which  this  post suggests to me, 



> *Daddy *
> Found that 20% withholding tax is deducted.
> 
> Shares go ex dividend next Wed 27th Feb.
> ...


stamp duty, transaction costs and typical ex div prices will ensure the strategy is unlikely to be  successful.


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## ClubMan (20 Feb 2008)

demoivre said:


> If this is a "quick buck" strategy which  this  post suggests to me


Yeah - I was thinking the same thing myself. This one crops up on a regular basis.


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## Daddy (20 Feb 2008)

D'ont assume my query related to a 'quick buck' as if there is anything wrong with it.

My post as at 1.43 p.m does not relate to a 'quick buck'.

I can buy and sell shares in excess of Euro 15k worth for the following transaction costs:

Purchase: .50% comm + 1% stamp duty 
Sale:  .50% comm.

All in 2% costs.

And if in excess of 30k worth my all in costs purchase and sale 1.8%.

Not excessive in relation to the final dividend which equates to 3.7% gross or net of 41% tax being 2.18%.

Not a bad punt for either the quick buck as you call it or for a longer term strategy for a blue chip company.


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## ClubMan (20 Feb 2008)

If you were getting 2.18% on cash deposits over 6 months (or a year?) then this would not be great. I don't really understand your motivation in looking at this to guide you in which shares to invest in rather than looking at the company's fundamentals, prospects for long term dividend payments and capital/revenue growth etc. etc.

If you do mean to buy €15K of shares to benefit from the dividend and then sell soon after then you will almost certainly not get your €15K back!


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## Jimbojones (20 Feb 2008)

I'm a little confused Daddy. If you hold the AIB Shares before Wed 27th then you will be entitles to the dividend. If you then sell when they go ex div on the 28th you will receive a price roughly equal to Cum Div- Div = Ex Div. Hence in a perfect market no gain...... In the real world you lose out on transaction costs and tax on dividends at highest rate?? This


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## Daddy (20 Feb 2008)

Transaction costs/stamp duty on purchase/sale say of Euro 15k worth = 2.0%

Dividend net of all taxes = 2.18%.

If you hold for the medium term at least your costs are covered on buying/selling the shares.

You are assuming that the share price will fall in line with the dividend once it goes ex dividend.

It will in all probability fall on ex dividend date but then again it may not or then again it may only fall a small amount or recover within a few days.

Will re-visit this perhaps next Thursday/Friday to see how my hypothetical purchase of Euro 15k at today's price of €13.75 works out taking all things into consideration.  Let's see what my pot will be worth say Frdiay week lunchtime.   Will post 2.00 p.m that day.   I expect to be in profit.


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## Jimbojones (20 Feb 2008)

Look forward to seeing the result.


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## ClubMan (20 Feb 2008)

Yeah - me too. As ever the EMH would clearly dictate that if there was some failsafe or almost failsafe advantage here then common knowledge of it would eventually cause it to disappear.


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## charttrader (20 Feb 2008)

_ You are assuming that the share price will fall in line with the dividend once it goes ex dividend.

It will in all probability fall on ex dividend date but then again it may not or then again it may only fall a small amount or recover within a few days.

Will re-visit this perhaps next Thursday/Friday to see how my hypothetical purchase of Euro 15k at today's price of €13.75 works out taking all things into consideration. Let's see what my pot will be worth say Frdiay week lunchtime. Will post 2.00 p.m that day. I expect to be in profit.

_Daddy, there are hedge fund managers and savvy traders scrambling over each other trying to exploit tiny market inefficiencies, you're being wildly optimistic to think that the price might not fall on the due date.  It's a foregone conclusion.  If price does not fall, then it will be for some other reason, ie, some news item that moves the market.  Markets are not perfectly efficient but they're not so slow as to allow your plan to work.  

As for dealing costs/stamp duty of 2% - that's reason enough not to trade the Irish market.


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## Daddy (28 Feb 2008)

Clubman/Jimbo
(Posting today and not tomorrow as no access to computer tomorrow)

Well - I am in profit as I expected on my hypo 15k but not by as much as I thought/hoped.

Buy price 13.75

Sell price 13.85 (current)

Dividend net of 41% tax .302 cent

Pur 1,091 shares cost incl 1.5% transaction costs 15,226

Sell 1,091 shares incl .5% transaction costs net receipt 15,034

Loss on buy/sell = 192

Dividend equates to = 329

Net profit for 8 days € 137.00 if sold now.

By comparison high yielding deposit a/c would have earned approx € 15 net of tax for 8 days.


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## demoivre (28 Feb 2008)

Congrats, you're the first man on the planet to discover an arbitrage situation playing cum/ex. div dates - what's scary is, I think from your posts you actually believe that ! Your house on the next position so...................... and in due course you can find mabs here.


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## Daddy (28 Feb 2008)

Funny but I can guarantee you I w'ont be seeing Mabs.

The play was a sound company and not a fly by night one.

My costs are covered and can you tell me where I would have got a better return in 8 days for my money ?


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## ClubMan (28 Feb 2008)

Daddy said:


> Well - I am in profit as I expected on my hypo 15k but not by as much as I thought/hoped.





Daddy said:


> can you tell me where I would have got a better return in 8 days for my money ?


I can tell you plenty of places where you could have gotten a real return better than any hypothetical return.


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## Daddy (28 Feb 2008)

Enlighten me so Clubman.

After all this was just an exercise the result of which you were looking forward to seeing.

Demoivre:

Just spotted your post from yesterday re 'Anyone experience negative equity on their house'.
Looks like your nearer to seeing 'Mabs' than I am.


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## ClubMan (28 Feb 2008)

Daddy said:


> Enlighten me so Clubman.


A real €15K in the bank would have earned more than any hypothetical return since the latter does not exist.


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## Daddy (28 Feb 2008)

Clubman : Your reply disappoints me as a moderator.

If I had made hundreds on this exercise you knew from the outset that I could'nt make real money yet you were looking forward to seeing the result and now to throw out this last comment is very low.


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## demoivre (29 Feb 2008)

Daddy said:


> Demoivre:
> 
> Just spotted your post from yesterday re 'Anyone experience negative equity on their house'.
> Looks like your nearer to seeing 'Mabs' than I am.



lol. I was having a laugh in that thread because I didn't take Mick1166 seriously which was why I  replied with this. TBH , bar that bloke in Some Mothers do 'Ave 'Em, I didn't think the joke would go over anyone's head!


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## Dman (29 Feb 2008)

Hi Guys,
I thought I understood this but from reading your previous emails I've become a bit confussed. 
If I have 100 AIB shares and they pay a dividend of 52cent per share. 
That means I get a dividend payment of €52. 
As I'm on the higher rate of tax, am liable for 41% of €52 as tax?

If I original brought the 100 AIB shares at €10 per share and then few yrs down the road sold them for €20 per share, I'm required to pay 21% or 23% tax on the €1000 profit I made on the shares? 

Is all the above correct?


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## Slim (29 Feb 2008)

> If I original brought the 100 AIB shares at €10 per share and then few yrs down the road sold them for €20 per share, I'm required to pay 21% or 23% tax on the €1000 profit I made on the shares?


 
DMAn

CGT is at 20%


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## Dman (29 Feb 2008)

OK, 
So it's 20% tax on any profit? 
41% tax on the Dividend payments?


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## DrMoriarty (29 Feb 2008)

Dman said:


> OK,
> So it's 20% tax on any profit?


Net of dealing costs.


Dman said:


> 41% tax on the Dividend payments?


Yip.


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## PMU (29 Feb 2008)

Daddy said:


> If I had made hundreds on this exercise . . .



Interesting, but you aren't actually allowed to invest with hindsight.  You have to trade today at today's prices.


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## demoivre (29 Feb 2008)

PMU said:


> Interesting, but you aren't actually allowed to invest with hindsight.  You have to trade today at today's prices.



This exercise is pointless. Had the op sold his hypothetical AIB stock  twenty minutes ago  and reported back here as he said he would, he would have got eur 13.6 for the stock and lost money overall on his position. Let the op post his next 100 trades to test his strategy - the odds are stacked against him playing cum/ex div dates and the costs are insane ( despite the fact the op doesn't think so) short term trading the ISE.


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## The_Hustler (29 Feb 2008)

Dman said:


> 41% tax on the Dividend payments?



Well, on your marginal rate.


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## docker (29 Feb 2008)

Two more questions to this tread...as a paye employee how do you make your tax payment on your dividend income declaration... submit chq payment to revenue? 

Also re "DRIP" option to reinvest divend end payments in additional shares instead of cash...how does one go about doing this? Any tips to minimise charges?

Thanks,
Docker


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## ClubMan (29 Feb 2008)

docker said:


> Two more questions to this tread...as a paye employee how do you make your tax payment on your dividend income declaration... submit chq payment to revenue?


Declare it on a _Form 12 _return and then pay the balance to 41% if applicable?


> Also re "DRIP" option to reinvest divend end payments in additional shares instead of cash...how does one go about doing this?


Contact the company's registrar. Not all companies offer this service/option.  





> Any tips to minimise charges?


_DRIP _schemes normally involved competitive charges as far as I know. In any case if you want to participate you don't have much choice - i.e. cannot chose to do so through anybody other than the registrar.


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## Daddy (1 Mar 2008)

Demoivre:

Thanks for your sarcasm again re your 'Some Mothers do 'Ave Em' post.
Who knows maybe you did invest in the stock market and are down heavily in the past 6 months and are feeling aggrieved by your bad timing of the markets.

As for trying my theory out on my next 100 trades you'll be waiting around for about 40 years or so as I only trade for real a few times a year.

I was simply putting forward my theory for AIB and not for every company under the sun.
A solid company that were paying a very good final dividend.   I would not have contemplated the exercise on a company paying a 2% final dividend.

If I was to now pick another company with which to play for real with an excellent final dividend it would be Royal Bank of Scotland buying now at £ 3.85 with a big final dividend.


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## Daddy (1 Mar 2008)

Just saw the big fall in USA.

I would get RBOS for probably £3.65 approx now early Monday going ex div on 7th March
paying a final div of 23.1 p a share that's over 6%.

I am not recommending this share as it would be against the rules here but this time i'll play for real  £15k worth and see where i'll stand on 7th March.


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## diarmuidc (1 Mar 2008)

charttrader said:


> Daddy, there are hedge fund managers and savvy traders scrambling over each other trying to exploit tiny market inefficiencies, you're being wildly optimistic to think that the price might not fall on the due date.  It's a foregone conclusion.  If price does not fall, then it will be for some other reason, ie, some news item that moves the market.  Markets are not perfectly efficient but they're not so slow as to allow your plan to work.


This is surely the crux of the issue. There are guys with access to tons of information/expertise/computer models/brains in London/NY/Singapore/wherever looking for the slightest advantage. And some guy in his sitting room in Ballymacsomewhere has found one that they all missed. IMHO possible,(as in 1 in a million) but highly improbable.


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## demoivre (3 Mar 2008)

Daddy said:


> Demoivre:
> 
> Thanks for your sarcasm again re your 'Some Mothers do 'Ave Em' post.
> Who knows maybe you did invest in the stock market and are down heavily in the past 6 months and are feeling aggrieved by your bad timing of the markets.
> ...



I buy stocks all the time and hold them for ten years plus - I've held stuff since the mid eighties so downturns don't cost me a thought in terms of long term investing. As a short term trader of FTSE futures market direction is irrelevant to me.  Your AIB punt was a loser if you did what you said you would do and sold on Friday. To test a strategy you need to look at numerous plays and see how they work out. Short term trading on the ISE is madness because of the costs involved - the odds are stacked against you. To put it in perspective buying 10 lots of FTSE futures, with a value of £575200 costs £10.3 to buy and to sell them costs another £10.3 and that's it ! £575200 is about €750000, which if you spent it on ISE shares ,would cost you €7500 in stamp duty alone - your proposed RBS trade will cost you .5% in stamp duty alone, £75 on the 15k you intend to spend! I would question the wisdom of the short term trading of stocks at all. To be a successful short term trader you need to excel at risk/ money management and discipline - the one thing you need to be certain of when you enter a trade is the maximum amount you are going to lose ! As returns for a trader go  your €137 return on €15k is abysmal imo. €15k would be ample to trade 3 FTSE future lots  -  4 net points per day is very achievable ( and very conservative imo)  in my experience over a decade.  For your eight days holding AIB  , trading 3 FTSE futures lots intraday instead, could have made you 32 points or in money terms £960 or about € 1250. Just one last thing, and be honest with us now,............................................are you really Frank Spencer.


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## Daddy (3 Mar 2008)

Demoivre:

Twice now you have referred to the fact that I would have lost money if I had done what I said I would have done.

The shares were available to sell at 13.95 on Friday morning the day I intended to post.

I quoted 13.85 as a selling point on Thursday as I was unable to post on Friday.

You merely picked 13.69 on a Friday to serve your purposes on that day to indicate that I would have lost money.

All a matter of timing.


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## demoivre (3 Mar 2008)

Daddy said:


> Demoivre:
> 
> Twice now you have referred to the fact that I would have lost money if I had done what I said I would have done.
> 
> ...



Whether you had lost or made money on your hypothetical trade is largely irrelevant - one swallow doesn't make a summer and all that. Myself and others have merely pointed out the risks/costs involved in what you are doing and that the likelihood of you consistently making money playing cum/ex div dates is remote, and even less so in a market where you are paying relatively big costs . Good luck, you'll need it.


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## ClubMan (3 Mar 2008)

demoivre said:


> Whether you had lost or made money on your hypothetical trade is largely irrelevant - one swallow doesn't make a summer and all that.


More pertinent reading?


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## askU (25 Mar 2008)

Daddy said:


> Found that 20% withholding tax is deducted.
> 
> Shares go ex dividend next Wed 27th Feb.
> 
> ...



Where can you find out when shares go 'ex-dividend'?


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## silvamuppet (25 Mar 2008)

askU said:


> Where can you find out when shares go 'ex-dividend'?



Ask your broker would be one possibility.
I use eTrade and they give information such as Div Ex date along with the payment date on their main snapshot page.

To be honest any finance website worth their salt should have that kind of info. yahoo finance does , reuters.com does also etc etc.


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