BHP Group Determination of in special dividend in connection with the Woodside Merger..

[pyad]

A small point, Woodside has just changed its name to Woodside Energy Group Ltd with the ticker WDS on the ASX.

https://www.woodside.com.au/docs/defaul ... 5efd3c78_3

[funduffer]

I now have my Woodside shares.

Just wondering how to unitise this transaction. I operate income unitisation for for my HYP. By gaining these Woodside shares, but not losing any BHP shares, have I added any new units or not?

If I treat it like a dividend received from BHP, then I have reinvested this dividend in Woodside, and so added new income units, which is what I normally do with re-invested dividends.

Or is the number of units staying the same and the unit price has magically increased by including the Woodside holding?

I am struggling with this one!

FD

[IanTHughes]

I now have my Woodside shares.

Just wondering how to unitise this transaction. I operate income unitisation for for my HYP. By gaining these Woodside shares, but not losing any BHP shares, have I added any new units or not?

If I treat it like a dividend received from BHP, then I have reinvested this dividend in Woodside, and so added new income units, which is what I normally do with re-invested dividends.

Or is the number of units staying the same and the unit price has magically increased by including the Woodside holding?

I am struggling with this one!

I would suggest that this is not a dividend in the sense of being "income" for the portfolio. This is not becuse it is in the form of shares received rather than cash, but becasue it is more akin to a "sale" of part of your BHP holding, and a "purchase" of Woodside Energy Group (WDS), albeit both were transactions forced upon you. And you have not "magically" received some shares for nothing. The price you paid was a drop in the value of you BHP holding.

That is my take on it - no "dividend" received.


Ian

[tjh290633]

I now have my Woodside shares.

Just wondering how to unitise this transaction. I operate income unitisation for for my HYP. By gaining these Woodside shares, but not losing any BHP shares, have I added any new units or not?

If I treat it like a dividend received from BHP, then I have reinvested this dividend in Woodside, and so added new income units, which is what I normally do with re-invested dividends.

Or is the number of units staying the same and the unit price has magically increased by including the Woodside holding?

I am struggling with this one!

I would suggest that this is not a dividend in the sense of being "income" for the portfolio. This is not becuse it is in the form of shares received rather that cash, but becasue it is more akin to a "sale" of part of your BHP holding, and a purchase of Woodside Energy Group (WDS). albeit both were transactions forced upon you.

That is my take on it - no "dividend" recieved.


Ian

I treat it as two balancing transactions, one out of BHP and one into WDS. No cash movement involved, but the "cost" of BHP falls and that is reflected by the "cost" of WDS. For that I have used the declared value of the "in specie dividend" of US$3.86, converted to GBP by the rate of $1.2588/1GBP. That gave me a starting price of GBP16.951. That is also confirmed by the data published on the WDS website for the closing price on 31 May 2022.

TJH

[scrumpyjack]

Legally it is a dividend and it will go in your tax return as a foreign dividend. Also, legally, the cost of your BHP holding remains unchanged and the cost of your Woodside shares is 1695.38p per share as discussed on other threads.

Of course you can put whatever figures you like in your spreadsheets if you think they better reflect economic reality. If so, no doubt you also treat other companies payments which are 'returns of capital but are paid as 'dividends' to reflect your view of economic reality? (eg Tesco re the sale of its far east business, Persimmon with its' capital return plan etc etc, or even those companies whose dividend is seldom covered by their profit (eg AZN).

[monabri]

I now have my Woodside shares.

Just wondering how to unitise this transaction. I operate income unitisation for for my HYP. By gaining these Woodside shares, but not losing any BHP shares, have I added any new units or not?

If I treat it like a dividend received from BHP, then I have reinvested this dividend in Woodside, and so added new income units, which is what I normally do with re-invested dividends.

Or is the number of units staying the same and the unit price has magically increased by including the Woodside holding?

I am struggling with this one!

FD

My view , FWIW, is that the number of units is unchanged as no money has been added or withdrawn. You will ( hopefully ) receive extra income from WDS as they pay a highish dividend. Hence your income per unit will increase. You still have the same number of shares in BHP.

[MDW1954]

Gosh! The delights of unitisation. I'm a BHP holder in a tax-sheltered account, and don't unitise, thank goodness.


MDW1954

[Lootman]

Gosh! The delights of unitisation. I'm a BHP holder in a tax-sheltered account, and don't unitise, thank goodness.

Yes, in a tax-sheltered account I just ignore things like this. Although I will sell off any resultant residual shareholding that is very small as it is then just annoying.

In a taxable account, then it is a dividend if my consolidated tax certificate says it is, and otherwise it is not. And the better brokers, like interactive investors, track cost basis anyway.

No need to make things difficult.

[funduffer]

Thanks for the replies about unitisation.

Will probably go with Ian Hughes / tjh approach.

Similar issue when GSK splits up I guess!

FD

[teecee90]

Has anyone with a Halifax account received any cash for their fractional entitlement? Their corporate action notice state that they don't issue fractional shares unless held in a Sharebuilder account and that any resultant cash entitlement will be dealt with in accordance with their terms and conditions. The Ts&Cs state that they will keep any cash entitlement of less than £5 to offset their costs. My fractional entitlement was 0.84 which would equate to more than £5 based on the WDS share price.

I know its peanuts in the scheme of things, but just interested if anyone else has seen any cash yet for their fractional entitlement?

[daveh]

Thanks for the replies about unitisation.

Will probably go with Ian Hughes / tjh approach.

Similar issue when GSK splits up I guess!

FD

Yes unitisation can be quite complicated. I do both accumulation and income units.

The accumulation units are easy. Everything stays in the portfolio at the moment so nothing happens to the number of units. New units are created only when new money is added from outside the portfolio. If/when I take income then that would involve a reduction in the number of units.

Income units are a bit more complicated as the income is being reinvested at the moment so that involves the purchase of new units as does the addition of new money. But what counts as income? In the past I counted anything I included in my annual dividend sum as income and so that was used to create new units. I do this once a month rather than every time a dividend comes in. But what about specials? In the past I've treated them the same as ordinary dividends, but recently I've had some very large specials from Pennon and Aviva that would have distorted my dividends received figures so have treated them as capital returns, kept them within the portfolio for unitisation purposes, so they have not increased the number of income units. So I've now decided to be more systematic. Any (special) dividends that come with a share consolidation are treated as capital returns, won't appear in my income stats. In specie divestment of new shares (eg Woodside, S32) will also not be treated as income. Regular dividends (even if called returns of capital eg PSN) and specials without a consolidation will be treated as income and involve the creation of new income units.

[funduffer]

Thanks for the replies about unitisation.

Will probably go with Ian Hughes / tjh approach.

Similar issue when GSK splits up I guess!

FD

Yes unitisation can be quite complicated. I do both accumulation and income units.

The accumulation units are easy. Everything stays in the portfolio at the moment so nothing happens to the number of units. New units are created only when new money is added from outside the portfolio. If/when I take income then that would involve a reduction in the number of units.

Income units are a bit more complicated as the income is being reinvested at the moment so that involves the purchase of new units as does the addition of new money. But what counts as income? In the past I counted anything I included in my annual dividend sum as income and so that was used to create new units. I do this once a month rather than every time a dividend comes in. But what about specials? In the past I've treated them the same as ordinary dividends, but recently I've had some very large specials from Pennon and Aviva that would have distorted my dividends received figures so have treated them as capital returns, kept them within the portfolio for unitisation purposes, so they have not increased the number of income units. So I've now decided to be more systematic. Any (special) dividends that come with a share consolidation are treated as capital returns, won't appear in my income stats. In specie divestment of new shares (eg Woodside, S32) will also not be treated as income. Regular dividends (even if called returns of capital eg PSN) and specials without a consolidation will be treated as income and involve the creation of new income units.

Thanks for this, daveh,

I am now at the stage you were at - I need to be more systematic in deciding what is income and what is return of capital. Like you, I previously treated specials as income, but where do you draw the line? Some of them are huge relative to regular dividends. Then there are the spin-offs like S32 and the WDS, which I agree are definitely not income. Luckily it seems that I did not treat S32 as income, so I have at least been consistent with this and WDS. GSK split next.

[IanTHughes]

I am now at the stage you were at - I need to be more systematic in deciding what is income and what is return of capital. Like you, I previously treated specials as income, but where do you draw the line? Some of them are huge relative to regular dividends. Then there are the spin-offs like S32 and the WDS, which I agree are definitely not income. Luckily it seems that I did not treat S32 as income, so I have at least been consistent with this and WDS. GSK split next.

For what it is worth, I only consider any "cash receipt" as income, if it can be "reasonably expected" that a similar payment will be received in the future. It has nothing to do with the size of the amount, whether the amount goes up or down, or whether, for a portfoliio in withdrawal, the amount is withdrawn or retained and reinvested. It is simply whether another similar "cash receipt" can be expected. Conversely, any "cash receipt" that I do not "reasonably expect" to be continued, is to be considered a "Return of Capital" in my view.

So I make a decision for each "cash receipt" as to whether it should be considered income. Regular "Specials" like for example those paid out by Admiral Group PLC (ADM), which I do believe are "reasonably expected" to continue, are therefore considered regular income for the portfolio. When it comes to Income Units, such "Specials" are treated just like Ordinary Dividends.

Of course another HYPer might well take a different view, and I do have a problem with those Capital Repayments being made by Persimoon PLC (PSN). Some of the amounts received must surely be considered as an Ordinary Dividend, but how much?

In my view there is no right or wrong way to do this, but one should try to be consistent, PSN holding notwithstanding. If one is looking to report on the portfolio's income success or otherwise, one should at least have labeled each "cash receipt" as either "Income" or "Return of Capital". That way others can make their own assessmentts.


Ian

[funduffer]

I am now at the stage you were at - I need to be more systematic in deciding what is income and what is return of capital. Like you, I previously treated specials as income, but where do you draw the line? Some of them are huge relative to regular dividends. Then there are the spin-offs like S32 and the WDS, which I agree are definitely not income. Luckily it seems that I did not treat S32 as income, so I have at least been consistent with this and WDS. GSK split next.

For what it is worth, I only consider any "cash receipt" as income, if it can be "reasonably expected" that a similar payment will be received in the future. It has nothing to do with the size of the amount, whether the amount goes up or down, or whether, for a portfoliio in withdrawal, the amount is withdrawn or retained and reinvested. It is simply whether another similar "cash receipt" can be expected. Conversely, any "cash receipt" that I do not "reasonably expect" to be continued, is to be considered a "Return of Capital" in my view.

So I make a decision for each "cash receipt" as to whether it should be considered income. Regular "Specials" like for example those paid out by Admiral Group PLC (ADM), which I do believe are "reasonably expected" to continue, are therefore considered regular income for the portfolio. When it comes to Income Units, such "Specials" are treated just like Ordinary Dividends.

Of course another HYPer might well take a different view, and I do have a problem with those Capital Repayments being made by Persimoon PLC (PSN). Some of the amounts received must surely be considered as an Ordinary Dividend, but how much?

In my view there is no right or wrong way to do this, but one should try to be consistent, PSN holding notwithstanding. If one is looking to report on the portfolio's income success or otherwise, one should at least have labeled each "cash receipt" as either "Income" or "Return of Capital". That way others can make their own assessmentts.


Ian

Thanks for this, Ian.

You are making a lot of sense to me!

One wonders how the professionals running income funds deal with all this, and whether they are all consistent with each other! Or is there an industry standard? Perhaps there is a finance professional on here that knows the answer!

FD

[monabri]

It's a dividend...BHP tell me that!

https://www.bhp.com/about/our-businesse ... bhp-merger