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Admiral Group Interims

For discussion of the practicalities of setting up and operating income-portfolios which follow the HYP Group Guidelines. READ Guidelines before posting
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Arborbridge
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Re: Admiral Group Interims

#434540

Postby Arborbridge » August 13th, 2021, 11:54 am

Wizard wrote:I struggle to understand how, on the HYP board, the words "big dividend rise" and "now on the naughty step" can apear in the same sentence. I would have thought the issue is with the other shares not providing a big rise in dividends. Admiral are on a gleaming pedestal as far as I am concerned, certainly compared to some of the other rubbish I bought when setting up my HYP.


I would have thought the issue is with the other shares not providing a big rise in dividends.

That's why I am being circumspect at the moment about changes in my HYP - some of them will work their way out in a year. ADM might well be trimmed at some stage, but I am in no hurry.

Of course, risk is risk, and one never knows when the axe will fall on any particular share. Look at any of the disasters in the past five years and not many sounded a warning gong.

Arb.

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Re: Admiral Group Interims

#434605

Postby Dod101 » August 13th, 2021, 5:57 pm

Arborbridge wrote:
Dod101 wrote:Excellent Interim dividend I must say but I wonder why they are phasing in the returns from the sale over two years? I wonder if they will find themselves under pressure to cut premiums given their level of profitability?

As an aside, given these results, it seems perverse to be thinking of trimming. The very thing that HYPers are looking for, dividends, and the first comments are to sell some shares!

Dod


HYP is a policy which depends on its safety factors to mitigate that risk. Originally based on equal weighting as a safety factor, it has been suggested that it makes sense to keep all shares within certain bounds to continue that safety factor. It also is a control on diversity: to push it to the absurd, if ADM were 99% of the portfolio and 35 shares made up the rest, would the portfolio have the diversity it was intended to have at the outset? No, and the diversity safety factor would hardly exist at all.

That does not seem perverse to me. You either use safety factors or you don't. It's just a question for most of us of where one draws the line.

Arb.


Of course I understand what you are saying but if you arrived from outside you would wonder why you would cut winners and back losers, like gardening, who would cut out success stories and plant weeds? Unless they get out of hand of course; I have just cut out a very overgrown clematis so I am not practising what I am preaching. It was behaving a bit like Admiral or Scottish Mortgage last year!

Dod

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Re: Admiral Group Interims

#434615

Postby Arborbridge » August 13th, 2021, 6:53 pm

Dod101 wrote:Of course I understand what you are saying but if you arrived from outside you would wonder why you would cut winners and back losers, like gardening, who would cut out success stories and plant weeds? Unless they get out of hand of course; I have just cut out a very overgrown clematis so I am not practising what I am preaching. It was behaving a bit like Admiral or Scottish Mortgage last year!

Dod


Well, I agree with you completely. I have always written here about the strange approach which HYP has - you are preaching to the converted in a sense.
I maintain that HYP is a relatively high risk strategy and one which goes against the grain of most conventional investment ideas. I'm not sure that people who sign up for it actually realise how radical the concept is, and it only makes sense if you start off intending never to sell so one can relax about the capital value and are only interested in the income.

Unfortunately, we are all human so that is a hard road to tread - that's why HYPers take a slightly less principled view and allow ourselves the "weakness" of bending the original concept by adding the bells and whistles which come closer to TJH's way of doing things.

Arb.

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Re: Admiral Group Interims

#434736

Postby tjh290633 » August 14th, 2021, 12:25 pm

Dod101 wrote:
Arborbridge wrote:
Dod101 wrote:Excellent Interim dividend I must say but I wonder why they are phasing in the returns from the sale over two years? I wonder if they will find themselves under pressure to cut premiums given their level of profitability?

As an aside, given these results, it seems perverse to be thinking of trimming. The very thing that HYPers are looking for, dividends, and the first comments are to sell some shares!

Dod


HYP is a policy which depends on its safety factors to mitigate that risk. Originally based on equal weighting as a safety factor, it has been suggested that it makes sense to keep all shares within certain bounds to continue that safety factor. It also is a control on diversity: to push it to the absurd, if ADM were 99% of the portfolio and 35 shares made up the rest, would the portfolio have the diversity it was intended to have at the outset? No, and the diversity safety factor would hardly exist at all.

That does not seem perverse to me. You either use safety factors or you don't. It's just a question for most of us of where one draws the line.

Arb.


Of course I understand what you are saying but if you arrived from outside you would wonder why you would cut winners and back losers, like gardening, who would cut out success stories and plant weeds? Unless they get out of hand of course; I have just cut out a very overgrown clematis so I am not practising what I am preaching. It was behaving a bit like Admiral or Scottish Mortgage last year!

Dod

The gardening analogy is a bit anomalous, because weeds invariably grow much faster than the plants you want and develop the fruit or seeds which are undesirable.

Having just had a weeding session, I feel that the pruning analogy is aimed at getting a better yield of fruit or flowers than would otherwise be the case. When top slicing, the object is to put the proceeds into shares providing higher dividends. To do otherwise would be self defeating.

Having a rampant clematis montana, I can understand your thinking.

TJH

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Re: Admiral Group Interims

#446840

Postby Dod101 » October 1st, 2021, 8:00 am

Just received what is probably my biggest ever interim dividend from Admiral (or anywhere else) this morning. Made up of Normal 87.9 and special of 27.1 making a total of 115p as the dividend from earnings. Then another 46p being a share of the capital return from the sale of a business. I hope Matt holds these as he would appreciate the return of capital as a dividend rather than a share buyback.

I don't mind that but will need to decide how to record it because I do not like calling capital revenue.

Dod

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Re: Admiral Group Interims

#446844

Postby tjh290633 » October 1st, 2021, 8:34 am

Dod101 wrote:Just received what is probably my biggest ever interim dividend from Admiral (or anywhere else) this morning. Made up of Normal 87.9 and special of 27.1 making a total of 115p as the dividend from earnings. Then another 46p being a share of the capital return from the sale of a business. I hope Matt holds these as he would appreciate the return of capital as a dividend rather than a share buyback.

I don't mind that but will need to decide how to record it because I do not like calling capital revenue.

Dod

It's all part of the Total Return. I have a column for Special Dividends, which has seen them from Rio and Admiral in the last 10 days, not to mention BHP's large dividend.

It gets reinvested regardless.

TJH

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Re: Admiral Group Interims

#446851

Postby Dod101 » October 1st, 2021, 8:54 am

tjh290633 wrote:It's all part of the Total Return. I have a column for Special Dividends, which has seen them from Rio and Admiral in the last 10 days, not to mention BHP's large dividend.

It gets reinvested regardless.

TJH


I am tempted to say 'Bully for you'. I need the income to live off but I find it hard to call what is a capital return income. Next year they have hinted at the same as an extra special dividend again but that the ordinary special may be reduced. I have just reinvested the extra special.

Dod

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Re: Admiral Group Interims

#446879

Postby 88V8 » October 1st, 2021, 10:04 am

In the last week the SP has come off nigh 10% without apparent reason nor comment.
Fine for me, I trimmed near the top, not so good for OH who bought in her ISA when they were about 3% down.

There must be something more than market noise behind this, I suppose we will find out eventually.

Meanwhile, it remains one of my largest holdings.

V8

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Re: Admiral Group Interims

#446880

Postby Dod101 » October 1st, 2021, 10:11 am

88V8 wrote:In the last week the SP has come off nigh 10% without apparent reason nor comment.
Fine for me, I trimmed near the top, not so good for OH who bought in her ISA when they were about 3% down.

There must be something more than market noise behind this, I suppose we will find out eventually.

Meanwhile, it remains one of my largest holdings.

V8


There was a lot of euphoria when the 'super' interim dividends were announced and I expect that it is simply the share price finally reacting to the large pay out even if as I expect, it was some time after the shares went ex div. And of course, nearly one third of the dividend payment today is actually a capital return which has the effect of at least marginally reducing the size of the business.

Dod

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Re: Admiral Group Interims

#446883

Postby vrdiver » October 1st, 2021, 10:14 am

Dod101 wrote: need to decide how to record it because I do not like calling capital revenue.

For me it's been straightforward (so far).
If a special comes with no consolidation of shares, then I have recorded it as a dividend. If there is a consolidation, then I record it as a (forced) sale of the lost shares.

VRD

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Re: Admiral Group Interims

#446884

Postby Gengulphus » October 1st, 2021, 10:18 am

Dod101 wrote:Just received what is probably my biggest ever interim dividend from Admiral (or anywhere else) this morning. Made up of Normal 87.9 and special of 27.1 making a total of 115p as the dividend from earnings. Then another 46p being a share of the capital return from the sale of a business. I hope Matt holds these as he would appreciate the return of capital as a dividend rather than a share buyback.

I don't mind that but will need to decide how to record it because I do not like calling capital revenue.

As general discussion about the question of how to record such "returns of capital" by companies, not advice specifically to Dod:

For UK tax records (if one needs to keep them), if the company calls it a dividend, record it as dividend income - disregarding anything the company might say about it being a return-of-capital dividend or suchlike. If they don't call it a dividend, it's almost certainly a capital distribution - there is an exception that if the company offered the choice of instead receiving it as a dividend, record it as dividend income. But companies basically stopped offering such choices when that rule came in, for the very sensible reason that such choices generally became utterly pointless at that point (there is a possible exception in the case of companies whose shareholders are mainly tax-resident in countries that haven't got similar tax rules - but I don't know of any case of such an exception happening). All of this is basically a matter of tax law, not personal preference.

For non-UK tax records (if one needs to keep them), I can't say anything more specific than "keep the records required by the foreign country's tax laws".

For non-tax records (if one wants to keep them), it's a matter of personal preference, not legal requirements. My preferred way of making such decisions is that regardless of whether the company calls a distribution a return of capital or a dividend:

* If it's accompanied by a share consolidation, I record it as a capital transaction, equivalent to a sale of the number of shares lost in the consolidation for the amount of the distribution.

* If it's not accompanied by a share consolidation, I record it as dividend income.

The reason why I make that distinction is that a share consolidation means that, assuming the dividend per share is held in the future, my future income from the holding will drop; if it is cut, my future income from the holding will drop by a larger percentage; and if it is raised, my future income from the holding will rise by a lower percentage, remain steady or fall. And similarly for the capital value, depending on what happens to the share price in the future rather than to the dividend per share. That's all just as if I had actually top-sliced the holding by the equivalent sale I record it as - so I apply an "if it looks like a duck and quacks like a duck, treat it as a duck" principle. (It isn't actually a duck, but the ways in which it differs are generally of little or no interest to a HYPer. For instance, the consolidation will generally increase the nominal value of the shares whereas the equivalent sale I record it as wouldn't do so - but does any HYPer care about the nominal value of Admiral shares being 0.1p???)

Doing that does have the disadvantage that one ends up keeping two different sets of records if one's HYP is too big to hold it entirely in tax-sheltered accounts. But of course, if that's the case, the only real way to avoid keeping tax records and "what's really happening to the entire HYP" records that differ from each other is not to keep the latter at all. (And not keeping "what's really happening to the entire HYP" records at all is a perfectly reasonable choice to make, just not one that will suit all HYPers - which is why I say "if one wants to keep them" above about non-tax records.)

Gengulphus

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Re: Admiral Group Interims

#446902

Postby daveh » October 1st, 2021, 11:16 am

vrdiver wrote:
Dod101 wrote: need to decide how to record it because I do not like calling capital revenue.

For me it's been straightforward (so far).
If a special comes with no consolidation of shares, then I have recorded it as a dividend. If there is a consolidation, then I record it as a (forced) sale of the lost shares.

VRD


I (generally) used to just treat it as cash and include it with the normal dividends. But after the Pennon special - which was massive - I'm now doing the same, if there is a consolidation treat it as a sale of the lost shares, if no consolidation treat it as a dividend. Which reminds me, most work out what to do with Jackson Life shares that were divested from Prudential as a dividend. they are still sitting in my ISA, but I have not yet accounted for them in my spreadsheet. Maybe I should just sell and get them out of the way and treat the cash as dividend from Prudential. Looks like that's what every one else is doing (selling their Jackson shares). There was an email from II that showed that Jackson shares were one of the most traded US shares on II, but almost entirely sells.

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Re: Admiral Group Interims

#446910

Postby Dod101 » October 1st, 2021, 11:40 am

What I have done is recorded the normal dividend, the special and the extra special separately. Next year there is apparently to be another extra special but it will disappear after that. I would not be surprised to see the special reduce next year judging by their dividend announcement this year. They said basically that there were extraordinary claims releases this year which may not be repeated at the same level next year.

Anyway this is all just thinking allowed because my Admiral shares are all help in an ISA so there are no tax implications to worry about. I am not at a stage in life when I am doing much reinvesting but occasionally I do and this is one such occasion. I have reinvested the extra special in buying some more Murray International for no particular reason other than that it stands somewhat below my median holding. I have thus satisfied my own thoughts, recorded the extra special as a dividend but then reinvetsed it as though it were a capital return (which I see it as being. It is derived from the sale of a business after all)

Dod

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Re: Admiral Group Interims

#447102

Postby JohnnyCyclops » October 1st, 2021, 10:16 pm

ADM is a rarity in that I lump the (oxymoron alert!) ordinary special in with the dividend, because ADM has such a long track record of paying specials that it's seemingly ceased to be 'special'. Conversely, their additional special dividend paid today for the sale is genuinely a one-off (or two-off, with next year's intended payment) and is recorded as such.

Other recent specials like RIO and PNN are clearly special and non-recurring.

This distinction helps in comparing year-on-year income changes per stock and at the entire HYP level. Else, non-regular specials would materially distort.

That aside, the cash from dividends and specials all end up in the same place - the S&S ISA cash pot, to be reinvested in the HYP.

I see ADM expressly made 'capital returns' in both FY2015 and FY2016, being 11.9p in each case, paid on 3 Jun 2016 and 7 Oct 2016. So, they aparently know the difference between a capital return and a dividend.

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Re: Admiral Group Interims

#447114

Postby Dod101 » October 1st, 2021, 11:35 pm

JohnnyCyclops wrote:ADM is a rarity in that I lump the (oxymoron alert!) ordinary special in with the dividend, because ADM has such a long track record of paying specials that it's seemingly ceased to be 'special'. Conversely, their additional special dividend paid today for the sale is genuinely a one-off (or two-off, with next year's intended payment) and is recorded as such.

Other recent specials like RIO and PNN are clearly special and non-recurring.

This distinction helps in comparing year-on-year income changes per stock and at the entire HYP level. Else, non-regular specials would materially distort.

That aside, the cash from dividends and specials all end up in the same place - the S&S ISA cash pot, to be reinvested in the HYP.

I see ADM expressly made 'capital returns' in both FY2015 and FY2016, being 11.9p in each case, paid on 3 Jun 2016 and 7 Oct 2016. So, they aparently know the difference between a capital return and a dividend.


Thanks. You have taken the trouble to express my feelings more or less exactly except that I take income from 'real' dividends and treat capital returns as that.

Dod

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Re: Admiral Group Interims

#447138

Postby Gengulphus » October 2nd, 2021, 8:57 am

JohnnyCyclops wrote:I see ADM expressly made 'capital returns' in both FY2015 and FY2016, being 11.9p in each case, paid on 3 Jun 2016 and 7 Oct 2016. So, they aparently know the difference between a capital return and a dividend.

As far as I can see (*), those additional payments were paid as dividends. For example, the company's 2016 interim results say:

The Directors have declared a total interim dividend of 62.9 pence per share (£174.7 million), comprising three elements,

* 36.8 pence per share normal dividend;
* A special dividend of 14.2 pence per share; and
* A further additional return of capital of 11.9 pence per share, representing an element of surplus capital not required for solvency as noted above.

The normal and special elements total 51.0 pence per share, in line with the total interim dividend for 2015. The additional special element of 11.9 pence per (£33 million) is the second instalment of the additional returns of capital referred to above.
...
The payment date is 7 October 2016, ex-dividend date 8 September 2016 and record date 9 September 2016.

It might be that the company made separate payments of 51.0p per share (documented as a dividend) and 11.9p per share (documented as a capital distribution) on 7 October 2016, but that quote would definitely have led me to expect a single payment of 62.9p (documented as a dividend) on that date, and I strongly suspect it was in fact paid as a single dividend payment.

The point of which is that if I'm right about it having been paid that way, it strikes me as an excellent example of why I wrote the following above:

Gengulphus wrote:For UK tax records (if one needs to keep them), if the company calls it a dividend, record it as dividend income - disregarding anything the company might say about it being a return-of-capital dividend or suchlike. ...
...
For non-tax records (if one wants to keep them), it's a matter of personal preference, not legal requirements. ...

Edit: And as far as I can tell from the quote from the 2016 interim results, the Admiral directors believe that a payment can be both a dividend and a "return of capital" - not the same thing as knowing the difference between them! Though to be fair to them, it can with a suitable definition of "return of capital" - what it cannot be is both a dividend and a capital distribution. It is however somewhat confusing to talk about returns of capital that aren't actually capital distributions...

(*) I didn't own Admiral shares at the time, so don't have definitive documentation in the form of tax certificates. People who did own Admiral shares at the time and who have kept their tax certificates should be able to make certain.

Gengulphus

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Re: Admiral Group Interims

#447161

Postby Arborbridge » October 2nd, 2021, 10:16 am

Those who have had this payment already are lucky: HSDL as usual haven't yet paid.
I'm sure, going back some years, that they used to pay before the weekend, now if its due on a weekend they seem to hold it over.
Actually, I always wondered it is was an accounting artefact with the cash showing as it was due, but not actually cleared.

Arb.

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Re: Admiral Group Interims

#447176

Postby idpickering » October 2nd, 2021, 10:38 am

Arborbridge wrote:Those who have had this payment already are lucky: HSDL as usual haven't yet paid.
I'm sure, going back some years, that they used to pay before the weekend, now if its due on a weekend they seem to hold it over.
Actually, I always wondered it is was an accounting artefact with the cash showing as it was due, but not actually cleared.

Arb.


Halifax are being their usual slack self, with the no show of my ADM dividend just yet. Even the HICL one was a day late. Shoddy performance imho. Back to ADM though, I’m happy to continue holding them and have no plans of selling them currently.

Ian.

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Re: Admiral Group Interims

#447184

Postby Dod101 » October 2nd, 2021, 10:52 am

Arborbridge wrote:Those who have had this payment already are lucky: HSDL as usual haven't yet paid.
I'm sure, going back some years, that they used to pay before the weekend, now if its due on a weekend they seem to hold it over.
Actually, I always wondered it is was an accounting artefact with the cash showing as it was due, but not actually cleared.

Arb.


I had the payment in my account at dawn yesterday morning. That was with HSBC Investdirect. I am not sure luck is the word. Those who have not been credited so far are the subject of some incompetence on the part of the platform or their custodians I'd say.

Dod

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Re: Admiral Group Interims

#447204

Postby Arborbridge » October 2nd, 2021, 11:54 am

Dod101 wrote:
Arborbridge wrote:Those who have had this payment already are lucky: HSDL as usual haven't yet paid.
I'm sure, going back some years, that they used to pay before the weekend, now if its due on a weekend they seem to hold it over.
Actually, I always wondered it is was an accounting artefact with the cash showing as it was due, but not actually cleared.

Arb.


I had the payment in my account at dawn yesterday morning. That was with HSBC Investdirect. I am not sure luck is the word. Those who have not been credited so far are the subject of some incompetence on the part of the platform or their custodians I'd say.

Dod


According to dividend data, the payment was not due until 2nd October which is a non-working day. Whether you think you were entitled to be paid a day early I guess could be arguable - or a matter of legislation. Personally, if a company paid before it was due, I would look upon that as a good manners, but if they pay on the next working day, it would be within the bounds of normal.
It's not a question of incompetence, but of policy. If memory serves me right, when Halifax were running the Motley Fool ISA, a credit would show on the account on the Friday if payment was due on Saturday - but I think that was just a courtesy. I seem to remember they told me they weren't cleared funds but knew they would be guaranteed, so the credit appeared.

If it's not there on Monday, it'll be a bad show, but HSDL do have form in this matter so it would not surprise me. At present, the jury is out.

Arb.


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