As Steve suggested, the Scrip 'Market Value' is $9.8461 (or at today's rate = £7.3734).
This is around 10p. higher than my buy price on the first day of ExDiv. Still, we have quite a time to run till Scrip Election on Thurs. 21 June and from the way the world is going today, I may well need all of that cover and more!
I'm not convinced that 'The Art of The Deal' negotiating strategies work well against despots, they appear to act more like a 'red rag to a bull'.
A decent Scrip Discount looks on the cards this time around and if it is, I shall sell into it because we still have no idea what HSBC is proposing as its strategy for the future, except for: 'Carry on up the Delta'.
The only hint I can find is a line from Joe Cocker's 1969 hit - Delta Lady:
"longing for your soft and fertile Delta"... er exactly!
If my calculation is correct, then the new scrip price will be 737.34p, which is quite a bit higher in sterling terms than the previous one, but as the pound has weakened considerably against the dollar since then, resulting in a much more favourable exchange rate, the "real" scrip price is likely to be lower than last time - bringing it below US $10 per share again.
I expect we will have the official announcement very soon - most likely tomorrow.
This would give a yield in dollar terms above 5.1% per annum and slightly over 1% by the time of the second interim dividend.
This being the case, I expect I will opt for some scrips this time.
The Buy-Back is progressing well, with over 1 million shares purchased each trading day since it commenced on 9th May - as at close of business yesterday, it must be about 12% complete.
With fewer that 1.4 million shares bought back yesterday, Credit Suisse finally seems to be getting the hang of the Ex-Div/Buy-Back conundrum. Mind you, the fall in Sterling and the rise in UK and US markets must have forced their hand.
Two more days to go before the Scrip price is fixed, after that they can let rip!
Doesn't sound very Swiss does it?
And welcome back on board. Not as exciting as AMZN I'm afraid, but thats good and bad....
Personally not sure that I'd want to buy HSBA with an kind of 7 handle (bought mine at 695 & 662), but thats just cautious old me. Hopefully should recover the 7p dividend and maybe more as I see we are down ~11p right now.
Some of us like our Muesli with Full-fat milk, which gives us the best of both worlds!
Similarly, when a fatless sponge is made, we fill it with cream and fruit - and really enjoy it.
There is nothing wrong with "proper" milk/cream, as long as plenty of other (more) healthy products are also consumed.
It will be interesting to see what happens when the shares go ex-dividend tomorrow - sometimes they dip considerably, other times they hardly move, and they have even been known to rise - with or without a buy-back taking place.
I expect the buy-back volumes so far are in keeping with the total number of shares traded.
There is certainly no hurry with this buy-back - they have until the end of October to spend a maximum of $2 billion.
Less than 15 million shares purchased so far, with over £100 million spent, but the dividend payout in July is likely to be reduced by just over £1 million.
I am quite happy to see the share price rise AND take the dividend, even if I do re-invest some of it in scrips.
As you say, it will be worth keeping an eye on things during the next five days, while the scrip price is set, and equally important, the sterling to dollar exchange rate.
Although I was still away from home when the 1st Quarter results were announced last Friday, I did see them early that morning, and was pleasantly surprised that a further buy-back was announced.
By commencing it in advance of the ex-dividend date, it means that HSBC will not even have to pay the current dividend on any shares purchased before Wednesday evening.
The share price has already increased since the buy-back started, so it may well make the next scrips more expensive than they would have been otherwise, so less new shares will be issued, but the share price is currently still lower than when the previous buy-back commenced, so it may well be possible to buy-back more shares for the same cost - depending on share price and exchange rate movements!
I returned home at the start of the week, but have been busy since then, making the most of the daylight hours and good weather to make some progress in the garden following our very wet winter!
Everything is now growing at a rapid rate, including the weeds, so there is still plenty to do, and most garden projects take time - something I started in the Autumn of 2016 is now beginning to take shape!
Similarly we need to be patient with HSBC as they move forward with new ideas/strategy and growth. It will be really interesting to see what happens between now and the end of next year - it will be early 2020 before those full-year results are announced.
It is, however, good to see that the share price is already higher than the previous scrip price, and we (my wife and I) have now just about broken even with our previous three scrip dividends.
Credit Suisse has now started its $2 billion buy-back programme on behalf of HSBC and the sp is responding quite well to the stimulus, bolstering it in the run-up to Ex-Div next Thursday.
Don't expect any fancy footwork from Credit Suisse (GS they are not) and so they will probably not change their buying volumes much after Ex Div next Thursday.
Worth a quick 'in and out' before next Wednesday afternoon as those normally inscrutable Chinese go mad for the Scrip? They must buy the shares by next Wednesday pm to have the option of taking the Divi in Scrip.
I can't see much more than a net 10p. rise by Wednesday night, versus the certainty of an Ex Div drop of 7 to 10p in the five days after Wednesday - Buy-Back support notwithstanding.
And I thought that nice Mr. Gulliver was such a straight shooter too!
Thank heavens that he is no longer in a position to influence the current team ... I gather that, for this year, he is just coming in now and then and offering friendly advice when it all gets a bit much for the new CEO (his appointee); for example when Flint said that his new job was like 'drinking from a fire-hose'.
Let's stop all this scaremongering shall we, I'm sure HSBC is safe in someone's hands.
Hi Monty,I remember the nature of US legal penalties and their preference for punishing foreign institutions being discussed here a few years ago,but that was before the John Titus film,"All the Plenary's Men",with its underlying message of LTBH lol.The film the HSBA PR dept wanted to make,but couldnt.It covers the 2012 Fine.The whistleblower says the bank set its own penalty and put the money aside 4 yrs earlier for that one.Carney not answering a question is funny too.
However, for them to categorise a new provision of $897million in order to head off US legal action as an 'unpleasant surprise', is a bit of an understatement! I can still remember back when $897 million was a lot of money. Once again, no apology to the shareholders from the company.
I liked what Buffett said about the Apple buy-back, it summed up the shareholder benefits of buy-backs. He said that he currently owns 5% of APPL but that after the $100 million buy-back he would own around 7% - and he will not have had to spend a bean!
Not so at HSBC where, as Pref said, the buy-backs have barely compensated for the dilution caused by issuing stock options and Scrip.
Buffett bigging-up Apple, Amazon and Alphabet, has made my weekend though.
HSBA pays out a shed load of money each year in dividends. Many shareholders take their dividends as scrip, which gives them extra shares without any trading costs. So many people do this with HSBA that the number of extra shares issued is quite significant (eg 39,256,458 scrip shares were issued for the 4Q2017 dividend alone). Do that four times a year and you can see that the company issues a huge no of scrip shares per year, which results in dilution = your shares are worth less. To counteract this HSBA does these buybacks periodically to reduce the share count and hence the dilution. Hey sometimes they even benefit the share price, but not always.....
Seems they went as low as 696.9, but finished at 714.4 only 6.9 down (0.69%). Or I guess 15.6 down (2.1%) from your 730 price. Didnt see the action myself as I was working in the garden in the AM and down the golf driving range PM !!.
I have about £6,000 in HSBA right now and have no plans to sell or buy any more. Selling and buying back wouldnt have made me a whole lot and would have been a lot of aggravation. Perhaps even more significant it would have required me to spend my time doing it and not doing what I actually did.
As long as they dont go down too much (still keeping to my 10% loss limit principle) and keep paying the dividends I shall be happy.
I don't understand how they return anything, am I missing something?
Company shares = 100
Company worth = £50
Company money = £50
Now £50 buybacks to cancel 50 shares happens so now...
Company shares = 50
Company worth = 50
Company money = 0
What's changed? I guess I am missing some basic point?
So I assume you mean that the value of the company is £50 plus the £50 it has in cash - so total value to the holders of 100 shares is £100 - or £1 a share.
After the share buy back - there are only 50 shares outstanding and the company has no cash - so the total value is the core business (still valued at £50) plus cash (£0 - all been spent on shares). So with 50 shares left - still only £1 a share.
Now assuming I summerised your perspective correctly above, then I need to point out a key thing you're missing. The likely ongoing value of the company. If it build up a load of cash, presumably it's making a profit. Let's pretend the company - valued at £50 is making £5 a year profit which is returned to the share holders as a dividend. Before the buy back, then each of the shares got a 5p dividend. But after the buy back, each of the shareholders will be getting a 10p dividend. That's a hefty dividend increase! Actually - with a yield of 10%, assuming the business is a good going concern, would probably result in people wanting to buy those shares - and the share price would rise and the yield would drop - etc.
There's a whole bunch of other issues as well - but the above will do for starters.
(Having said that - as a shareholder, I'd always rather they returned the cash as a special dividend, then I can decided for myself if I want to use it to buy more of the company in question)
Company shares = 100
Company worth = £50
Company money = £50
So you are talking about a company here where the only asset is cash.
Assuming that the market knows this, then the share price value will be 50p.
In your example, the company bought back the shares at £1 each. It isnt allowed to do that because it then is favouring one group of shareholders over another. If it did buy at £1 then that would be fraud against half of the shareholders who get nothing back.
"Given the strength of its competitors'Â numbers in this reporting season, investors might have expected LSE:HSBA:HSBC to round off events in some style, but unfortunately the bank has missed the mark.Slipping to an overall loss for the quarter was ..."
I always think it is an interesting question - "it needs to take a lesson from APPL buy-back strategy if it wants to endear itself to the markets and its shareholders." My question is always, well do they have to, or want to? Isn't their job to run the business as well and efficiently as they can. The share price can and should look after itself. I like a company that looks to drive the share price - if I own them, but that shouldn't be their main aim. Shouldn't it be to run it well and let the share price do its own thing? Normally the share price will reflect the business. In fact, if they are remunerated on share price, motives can be twisted and results unfortunate (Persimmon). Just a musing really (on one of the better boards....). SL
The fact that you didn't see any kitchen-sinking or any definite news about pulling out of countries is the problem; in this case, 'no news is bad news'.
The operating expenses increase is put down to new investment but there is no clear explanation of how or where this new investment was made; consequently, this looks like a lame excuse for overspending - why didn't they just use the cash they generated from disposals of other businesses to finance such new 'investments', or was it all blown on fines and executive bonuses?
The shares are now down more than 30p. on my selling price of 730p. the day before yesterday and that's not -2.4%.
I sold, not just because I believed there would be a drop at Q1 but because I don't have a clue what the new executive team' strategy is, and because Ex-Div looms in a few days.
I now have the possibility of buying back later but not the intention to - as yet! As for the costs associated with doing so, I guess it just depends on how many shares we are talking about; one mans 'toe in the water' is another's 'arm and a leg'.
I don't blame you for not wanting to track the buy-back this time though. I presume that Credit Suisse will be employed to bore us all rigid for months. Limiting buy-backs to $2.0 billion this year is simply too small a number to move the needle. HSBC is a very wealthy institution and it needs to take a lesson from APPL buy-back strategy if it wants to endear itself to the markets and its shareholders.
The rise of 'China's local bank', will start with the demise of the 'World's local bank' and the arrival of the removal vans at Cary Wharf.
Scanned the HSBC Q1 results this morning. Didnt see any major kitchen sinking or announcements about pulling out of any countries, operating expenses up by the look of it - but otherwise didnt see anything dramatic. Shares down 2% in HK - but whole market down there on trade discussion concerns. Down 2.4% in London now as well.
Personally I dont think that a 2.4% drop is sufficient to be worth having sold in advance with the intention of buying back later. Much of that would be taken up with spread, stamp duty & commission. Of course if it keeps dropping thats another matter.
Right now I have no plans to track the new buyback when it gets underway. Its quite time consuming and have seen no personal benefit in doing so on previous occasions. So I'm going to give it a miss and live in blissful ignorance of the end date !!.
I agree that brokers have been very slow to change their charging structure for non-UK shares.
Now that iii.co.uk is in cahoots with a broker who understands such matters, I think you will find that they enable you to hold funds in USD as well as Sterling, without obliging you to convert every trade back into Sterling. That is unless you are holding shares in a SIPP, when the tax rules state that everything has to be converted to Sterling. I am currently holding funds in iii, from the sale of some AMZN shares, in dollars because I think there will be a continued weakness in Sterling.
As far as HSBC is concerned, I'm not convinced that holding through 04 May is at all safe. There has been very little strategic information announced by the new team in the past six months and we know that there will not be much issued in the Q1 report. We do know that HSBC wants to pull out of certain countries and extracting themselves may well mean short-term losses. It also seems unlikely that there will be significant ($3 billion plus) buy-backs anytime soon, as they seek to maintain the dividend and its Scrip option for a bit longer.
HSBC in HK rising in expectation of the Q1 report, I will watch it tomorrow morning and decide on whether to hold or fold.
Glad to hear your US adventures are delivering a plus score. Saw a piece on the news last night that AAPL earnings beat expectations again and were up 4% in after hoyrs trading at the time, so that should help.
My broker has just announced that it is reducing the cost of overseas share trades, down to 1% for up to £5,000 and 0.25% for above £20,000 with steps in between. Still not enough to make me try overseas investing again. Really need a dollar account that you could move money into and out off I think rather than paying when yiu deal shares. Some brokers offer this service I think. Mind you I have to say that my enthusiasm for investing in the US with its growth only stocks and huge volatility really isnt that high.
Guessing yiu plan to sell your HSBA stake because your think Flint is likely to do some kitchen sinking in the upcoming results ?. Not far off your 735 target, closed at 729 yesterday. I shall hold and hope for the best.
Re my pref goodwill payment. Wasnt down to me but the result of Mark Tabers campaign. Got to wait some months before I can submit my claim though. Still busily researching stocks to invest in as I havent spent all my pref cash yet.
Today my US adventures are about to become a whole lot more interesting.
APPL reports its Q2 after the bell in the US tonight and Sterling has just dived below $1.37. Currently, the APPL shares are around 5% down on my buy price but given the strong rumour that APPL will soon be handing out $100 billion (not just to me you understand) it looks like the sp will respond positively despite the i-phone X incident. Anyway, I'm not looking to sell them unless Warren B does!
GOOGL is also 5% down and has proved more susceptible to the anti-tech lobby. However, it's Q results were stunning and once the noise dies down ...
AMZN are my largest holding by value and are 29% up on my buy price.
HSBA has not managed to make it back up to my selling price of 735p. and if they do before the close on 03 May, I could well sell my toe in the water stake (bought at 688p.)
In conclusion, yes this is risky but would you sell AMZN and buy HSBA today?
Will this adventure come good? In the words of that great American Philosopher - Donald J Trump - we'll have to wait and see!
Glad you kicked Aviva where it hurts.
How are you doing %ge wise on your US adventures ?. Of Apple, Amazon, Facebook and Google seems to me that only Amazon has done well. And the £ headwind is still a problem Im sure. Scary volatility in US markets, happy to stick with the far more sedate FTSE myself !.
HSBA doing really quite well. I have two tranches bought at 695 and 622 both nicely in profit and looking forward to the next divi !.
Hey even got an email from Aviva today telling me that I can claim a goodwill payment from them over the pref issue. Worked out the numbers and i reckon its worth just over £10,000 so definitely worth having !. Still got a bit to do to get back to where I was but I feel like Im getting there.
Good to hear from you and I'm glad Mrs. Bob has given up 'dangerous sports'. I'm scheduled to be in Jersey in June; looking forward to hitting the beach and trying some sandwiches with real sand in them - see you then.
I decided to unload some of the 'refuge' US shares yesterday. Amazon's Q1 and a tumbling Pound made it all a bit too tempting to sell around 20% of them; $1600 seemed a nice round number, not that I'm planning to go back up to my neck into HSBC just yet. Besides, I remember my old Grandpappy saying that if somebody is offering you more than the equivalent 50% pa, you grab it, no questions asked.
The contents of HSBC's Q1 on 04 May is still anybody's guess and I might well sell on the 'sizzle' on 03 May rather than waiting for the Divi - it certainly wasn't worth waiting for it last time around and with no big buy-backs in prospect, two 'new brooms' sweeping clean and 'Carry on up the Delta' being the only certainty, I think I'll wait and see.
Actually HSBC's dividend cover is often negative by my calcs which use cash flow after tax and after reinvestment needs rather than reported accounting profit. Using cash flow, dividend was covered 5 times per annum ON AVERAGE over the past ten years mainly due to extremely positive cash flow in 2010, 2011 and 2013. But even that is not a reliable indicator as it fluctuates hugely from year to year.
The problem with calcs like this is that HSBC's accounts are hideously complex and have the capacity to fluctuate wildly due to the expansive nature of their global business and currency fluctuations when translated back into US dollars. This is probably why HSBC chooses to use 'adjusted' accounting figures both for internal management reporting and for shareholder commentary in the annual report.
So where does that leave us as regards the future sustainability of the +/-4.5% dividend?
The complexity of HSBC's business and their accounts makes me nervous enough to not stake my income needs on their dividend, although it does seem to be adequately covered on average. I take comfort from the fact that Chief Risk Officer Moses has a substantial personal holding of over 1million shares - as a former chartered accountant he ought to know how safe or otherwise HSBC really is.
Like others on this board, I wonder about the new CEO's strategy. Nearly always a new CEO will embark on a fanfare AND take a big bath in the accounts in the knowledge it is the only time he can do so without being sacked or losing his bonus. So I would expect 2018's accounts to have a good dose of impairment charges and conservative loan provisions to make it easier for him to achieve future targets.
As to safe dividends in the meantime I prefer housebuilding especially Persimmon Homes which has been reliably paying well-covered dividends for a number of year and is currently paying 8% (and their accounts are easier to understand). I've written about that extensively on the PSN board so won't repeat that here.
Thanks Monty, as i own these for the divi, I'm embarrassed to admit i hadn't checked cover. I'm a little surprised that it isn't 1.3 or 1.4 times covered, which is still light, let's face it. But they've paid it for a while so i don't suppose they'll change unless something drastic happens. I still wonder if we'll get a new-broom-kitchen sink job in the next 6 months once they've had a good look round. Almost added some more in the 660's but held off. Happy with what I have I think. SL
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