I think that's too concentrated.
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Not sure what they see ? Is this the third or fourth year ?, (sorry I forget), where they haven't been able to sell what they build even when they wind down the build rate significantly ?
Anyway....gotta say this fills a few gaps in my portfolio as some of their real winners are not held by me in my own name.
I am pleased I have a significant stake with Kingfish warrants (KFLWF). I am not entirely convinced by their strategy with their Kingfish fund which is quite dramatically more concentrated that either Marlin or Barramundi but the benefit of the warrants is they cost me very little (6.8 cents each on average), and I don't have to decide if their strategy has worked well until they're potentially exercisable on 10/03/21. My estimate of the exercise price is $1.51, (exercise price is the face value $1.64 less dividends paid during the term of the warrants). I think with the shares at $1.70, and an exercise price of approx. $1.51 the warrants are both very good value at around 10 cents but also provide a great deal of very valuable optionality going forward. It feels to me like a great time with current Covid risks to have excellent upside exposure with limited downside risk and that's the benefit the warrants confer until 10 March 2021.
With 15% in A2 fund taking a bit of a hit
But Summerset helping them out
They did very well adding to SUM quite a while back...hope you did really well doing the same.
Huge jump in NTA of just on 9 cents per share announced today to just nudging on $1.79 which I think is a new all time high. https://www.nzx.com/announcements/361563
I expect the exercise price of the Kingfish warrants KFLWF on 12 March 2021 to be $1.51 and on an adjusted and fully diluted basis I assess fair value of the warrants today at 22.4 cps.
(Opportunity knocks ! Quite an opportunity there with the last trade at 15.7 cps and plenty of offer at 16.5 cps).
Disc: I hold quite a few and intent to exercise my warrants and convert to shares on 12/03/21.
Big stakes in MFT, IFT, FPH, ATM SUM and others I don't own so this fills a lot of portfolio gaps for me and provides excellent diversification and moderates my risk while still enjoying awesome returns.
A reminder that Kingfish pay 2% per quarter (8% per annum) in PIE dividends based on asset value and this represents a ~ 12% gross return for 33% taxpayers.
http://nzx-prod-s7fsd7f98s.s3-websit...873/333416.pdf
Summerset their star performer in the Sept quarter. KFLWF warrants are still trading well below their fair value in my opinion, see above.
What is going on with KFL at the moment with the SP ($1.94) running about 11 cents ahead of the most recent NTA ($1.8257 on Wed)?
Given that it's often running at a 2% or 3% discount, what has got it to a 4% or 5% premium?
People are prepared to pay for top performing funds. Is it really that surprising that people are chasing a reliable tax free PIE yield of 2% per quarter in this zero interest rate environment ?
From last month. KFLWF now bid 30 cents, nearly doubled in a month. I could very, very easily have bought all the warrants on offer at 16.5 cents but I chose to magnanimously highlight this extremely lucrative opportunity for others. Going off some recent comments in the ATM thread I'd be easily forgiven for thinking I have a large number of haters.
I like to think I make a positive difference for people and try too but I think I am often misunderstood. Above is one of countless times over more than a decade and 17,000 posts I have tried to highlight opportunities for others benefit and to point out risks. Sadly...I think its well and truly overdue that I reassess how much time I spend on this forum.
Hi Beagle,
I am extremely grateful for your advise and take all your suggestions very very seriously. I have missed this because of lack of understanding of the Warrants:(.
Please continue posting in the forum, you and other old members are invaluable to the group.
Thanks,
Keerti
[QUOTE=keerti;859265]Hi Beagle,
I am extremely grateful for your advise and take all your suggestions very very seriously. I have missed this because of lack of understanding of the Warrants:(.
Please continue posting in the forum, you and other old members are invaluable to the group.
Yes, I agree wholeheartedly. Very grateful for Beagle's input
Thanks folks for your kind words.
Welcome to the forum exwesty. You are very well positioned :t_up:
Keeping in view the current trend of SP of KFL , MLN , BRM ...all Fisher funds managed companies doing identical services but in different markets ...like KFL is only NZ stocks , BRM is only Australia market and MLN is rest of the world minus NZ and Oz . All give quarterly PIE returns of 2 % of the average NAV of the quarter . Not to be confused with company dividends which comes from profits and free cash flows of the company . These PIE returns come from mostly capital returns as they have only about 25% as actual dividend income from their investments .
But it seems many investors are confusing these PIE quarterly returns as general company dividends . To make it more clear ...in a stagnant or slight down market with no further capital appreciation of their investment portfolio this will result in capital investment in these funds going down in value as every quarterly PIE return will result in faster NAV erosion thus capital depreciation
Thats why premium to NAV being paid by investors is directly related its SP and not anything else ...BRM at 22% premium to NAV , MLN at 14 % premium and KFL at 9% premium .
BRM SP = 0.99 MLN SP = 1.29 KFL SP = 2.01
It seems many investors do not fully understand this quarterly PIE returns concept ...ie 2% NAV returned as dividend .
This works very well in a rising market as u dont get to know your original investment depreciation but in other case this will result in capital loss !
Now paying 22 % over NAV can mean your original capital may not rise for next 2 years even when markets go up 15 % each year or even more
IMHO this trend is not going to end well for many many ....
So what to attribute Carmel Fisher's buying of BRM and MLN over the last few weeks?.
I don't disagree with you...beats me..
Carmel is a high earner ...going on high tax bracket from next year for all her direct company investments ...She needs to pay 39 % tax on direct company dividends ..ie extra 6 % after 28 % + 5% DRWT .
So for her it still makes sense to convert her other personal company shares to PIE income funds .
To her it doesn't matter small pittance extra ...but to small investors like us even paying 5 cents extra pinches ...:D
I have been thinking along the same lines as alokdhir for a while now regarding how it will end for all their funds.
I invested in their KS & listed funds in the early days but switched a few years ago.
For a portfolio for someone approaching retirement with little savings(not me) I split a third of the funds into 5 listed shares in 2007 at $10,000/share
2007 $10,000 MLN value now $9520.It has received quarterly dividends of around
8.5 c/year https://marlin.co.nz/assets/Uploads/...nd-History.pdf
Adds about $10,400 ?
Total value $19920 slightly more if dividends were reinvested
According to the investor center value would be around $33000 now
https://marlin.co.nz/investor-centre...o-performance/
2007 $10,000 IFT value now with DRP $46,367 plus a few other dividends
As it turns out 2007 was a good time to invest in IFT
https://infratil.com/for-investors/
2007 $10,000 FPH value now with DRP $136,360
It would be interesting to have done the same with MFT & EBO in hindsight
Great post of actual experience and figures ...as I also invested my original funds 1/3 each in BRM / MLN / KFL
Out of frustration because of poor returns moved all to KFL
Still I would have done 5 times better by investing direct in their own main stocks like FPH / MFT .
So I agree with you fully ...lure of 2% PIE returns of NAV quarterly can lead to silly investments
DYOR ....Cant follow anyone ...including Ms Carmel Fisher !! :eek2:
When will the warrants exercise price be announced? Will it be before the exercise date?
Update. These have been trading at quite a substantial premium to NTA, latest share price $2.04 at time of posting and last reported NTA was $1.85 as at last Wednesday, (and the market has dropped a fair bit since then).
I do not feel such a premium is warranted. I would not be concerned if the premium was 2-4% but it is currently well north of 10%, (adjusted for warrant exercise) and I feel that is unjustified as KFL have not outperformed their benchmark as much as the other funds Barrmundi and Marlin. I made my own assessment over the holidays that the warrants were not worth the 44-45 cents they were priced at, (at one point), and sold them all.
I remain of the view that the Barrmundi warrants are an excellent hold at around 21 cents.
Good luck to holders.
If one had the money to buy up a large number of warrants @ $0.06 each, one could make a significant profit selling them down the track @ $0.41 (today’s price). Mr B no doubt did very nicely. But warrants issues can be risky and there are no guarantees the warrant price will do what these have. Having said that, I seriously wish I had bought a few ;)
One could choose to do as you suggested - exercise the warrants, keep the cost of exercising, and sell the rest at a “profit”, but again, you need to have a fair few to warrant doing that. I think it is more about how many you hold than what the price is - if I were to do that with my very small number of warrants, I might make $250 profit, but keeping those shares would be more beneficial to me in the long run.
At present with KFL current NAV around 1.84 ( coming Thursday's ) thus making its diluted NAV less at least 6 cents further ...total premium of around 25 cents via KFL shares and thru warrant route its premium of 12 cents !!
This is very steep premium to pay for trying to get regular income as when situation will change in about years time then SP of KFL will most likely revert to its long term ways ie 2-3 cents discount .
Loosing 25 cents for 12-15 cents of dividends doesn't look very appealing .
Warrants fair price should be close 30-32 cents IMHO
FYI - I estimate the current NTA of KFL at $1.81, (market has moved down since last Wednesday) and fair value of the warrants is currently about 30 cents.
These are fair values based on NTA but the market is currently attributing a large premium to NTA to KFL shares. Whether this sized premium is an enduring phenomenon remains to be seen.
If I was in your situation Justakiwi it might be worth exercising them and seeing if the shares stay at about the current level in which case $1.51 + 0.41 = $1.92 and with the shares at $2.03,, you could do pretty well.
Doing well and beating the index http://nzx-prod-s7fsd7f98s.s3-websit...417/339009.pdf
Just checked again with company ....Warrant converted KFL not eligible for March divvy as allotment date is 17th March which is after ex divvy date of 13th March !!!
So thought to let all warrant holders and buyers to know this info ...divvy is expected to be around 3.75 cents for March qtr
Warrant converted KFL gets first divvy in June qtr
Well that premium to NV which got to 13% just over a month ago has dissipated pretty quickly - now shareprice is a fraction over NAV
Suppose something to do with impending warrant conversion....if all converted lowers NAV to about $1.80 (I think)
So is the 'premium' adjusting to the the lower NAV - would still be 6%
Kingfish gurus = how have things played out at previous conversions?
Just wondering if we will see KFL bak trading at a discount to NAV
Normally it would have been around 10-15 % discount around this time of the warrants exercise time line ....but keeping in view the strong retail participation due to the demise of term deposits as regular income its just about back to NAV levels
So in my view its still around 10-15% premium to regular levels what should have been ...here market correction also played a role to help close the gap fully .
IMHO this premium will return after warrants conversion done and dusted and markets recovering from these corrected levels . This is a good opportunity to invest in KFL at very reasonable levels for regular income part of your portfolio at least . KFL always does very well after warrants conversion
Adjusting the last reported NAV for estimated index decline of 2.5% since then gives me an estimated closing NAV today of $1.82.
Adjusting for the pending warrant issue and assuming all warrant holders exercise @ $1.51 I see that reducing NAV by ~ 6 cps to fair value of $1.76.
Fair value of shares carries rights to the pending distribution in March of an estimated 3.8 cps so NAV fair value ex divvy adjusted for warrant exercise is ~ $1.72
Warrant exercise does not confer rights to the pending dividend so fair value of warrants = $1.72 - $1.51 = 21 cents.
Anything above those figure which the shares or warrants are trading at is the premium to fair value, e.g. shares closed today at $1.90, NTA estimated, adjusted value for warrants = $1.76 = 8% premium.
If I recall correctly there was a bit of a bonanza at the last warrant conversion as the warrants were trading at one point at a 13% discount to fair adjusted value pending exercise
Whether the shares and warrants are worth the premium to estimated adjusted NTA is up to each investor to decide for themselves. If anyone's interested, a few posts back I noted what I had done in regard to my warrants.
The premium these are trading at suggests to me there's a large number of investors chasing the PIE tax paid dividends of 8% per annum. I note significant premiums in Barramundi and Marlin.
Anyone know when shares from exercised warrants will be allocated? Thought it was supposed to be today.
When the new tax rate of 39% comes in April for those so lucky, will these funds (KFL and BRM) be more tax efficient, does it mean that it may be worth buying these shares above NAV?
KFL was my first purchase back in 2016 and it has served me very well. I have taken advantage of warrants issues and DRP to grow my small holding, and my annual total return has been in the vicinity of 24%. I have never bought any additional shares on market and have no plans to do so. I just sit on it and let it go it's thing and I have not been disappointed.
Being a holder in all Fisher listed funds since 2010 ...I can say KFL has done the best out of the lot and it has done very well for me . I also take DRP and sell on market for my regular retired income requirements .
Since last Nov they all have gone at substantial premium to market ...Highest being BRM and lowest for KFL ...it seems market is trying to price them based on 6-7% dividend yield instead of NAV based .
Doesn't look like premium will go away soon as it suits regular income retirees as well as high income earners on 39% incremental tax rate . Being a listed PIE there dividends are taxed at 28% final ...as well no need include there income in IR3 if it suits individual investor . So they have very distinct tax advantages over direct investments for some .
Overall KFL is very well managed with exceptional track record ...fully recommend as a very satisfied investor since 2010
Had a long hard think about this (and BRM and MLN) and I just can't justify paying the premium.
I think I will DIY it for now and see how and feel in a couple of years.
While I accept a small premium could be justified for some investors due to the PIE status it doesn't justify a 8% one overall to my mind.
Plus if someone is wanting the PIE status then why not invest in a managed fund direct. I realise there are advantages to a closed listed fund but I don't see them justifying that sort of premium.
Only time will tell if I make the right decision, but if KFL returns closer to NAV then I'll have another look at them then. In the meantime Id like to think that with the savings on fees and the NAV Premium I should be able to outperform them managing it myself. Only time will tell of course.
Noting that for the situation I was looking at (Income investing for my retired mother) there is no real tax advantage to the PIE status.
I may look at some of the other options like TCL or HFL to get some international exposure. But in the meantime the premium moves closer to say 2 percent or so I can't see this one as being for me.
Whats the buzz on KFL ? Why suddenly so much interest in it ?
Any news about new warrant issue ? Or people just preparing well ahead :confused:
CNU010 paying back $400,000,000 tomorrow already looking for a home?..........
Why KFL lagging behind its other cousins BRM and MLN in premium over NAV department ...after all it also has all the qualities and features of other 2 ??
I think the real question is why are BRM and MLN priced so far over their NAV.........I don't want KFL to get that far ahead of its NAV.
I'm putting it down to new entrants. Maybe the sharsies crowds or similar cohort. Div yields at 4 to 5% is all they read.. Size of trades suggests same.
Or maybe they’re just selecting three very well managed companies which afford them global and sector diversity. Three companies which are well established and provide a way for them to invest in many companies without having to manage them themselves. Three companies that pay decent dividends, have a DRP option, regular warrants issues - all of which helps them grow their holdings without any additional capital expend if that’s what they prefer. An alternative option to ETFs perhaps.
It puzzles me how people get so agitated by “unusual” share price events, when we all know that SP is next to meaningless. The market sets the SP. Why does it bother you? If you have a large holding - it’s an opportunity to cash out a few $ to use elsewhere if you wish. if, like me, you’re a long term holder, you just watch with interest but know that things will change, as they always do. But from a long term perspective, it seems to me that the Fisher trio will be a positive investment for those of us who hold.
I understand the ease and advantages of holding the different Fisher Funds, and have been a holder in the past. It is actually pretty easy to largely replicate these holdings.
Take KFL for example, which is easily their biggest fund. All NZX holdings, their biggest 5 holdings currently represent 64% of the fund and the rest of their holdings are here. Investor Centre | Portfolio Holdings | Kingfish Limited NZ
With the advent of Sharsies or other low-cost platforms makes it easy to have a portfolio largely mirroring this. Of course KFL are a little more active, buying/selling at different times - and for example with A2 they have sold down over recent months. But hey, you've got to earn your management fees somehow.
A cynic would say about the dividends not really being dividends (at least some of the time through its existence) but more returns of capital gains. Then you have the warrants to keep the money coming back in that has been paid out......or this this just being cynical?? :confused:
They are another option for investment, good track record, PIE status, diversified, easy etc.
JK - I don't know if posters are "agitated" as such by the share price. Just probably puzzled why someone would pay $2.02 for something worth $1.81.....that they can go out and buy for $1.81.
I get where you re coming from and I agree - I wouldn’t pay $2.02 for them. But on any given day, they are worth what the market is prepared to pay for them. Which is why I say SP means very little. Today’s SP is really only relevant if you are planning to buy or sell today. If you’re not intending to do that, the SP means nothing.
SP doesn’t indicate a “good” company or investment. It simply reflects what buyers and sellers are choosing to do on the day.
Kingfish delivers a record result - NZX, New Zealand’s Exchange
Results for announcement to the market
Name of issuer Kingfish Limited
Reporting Period 12 months to 31 March 2021
Previous Reporting Period 12 months to 31 March 2020
Currency NZ$
Amount (000s) Percentage change
Revenue from continuing operations $155,966 +1,918%
Total Revenue $155,966 +1,918%
Net profit/(loss) from continuing operations $142,713 +8,092%
Total net profit/(loss) $142,713 +8,092%
Interim/Final Dividend
Amount per Quoted Equity Security $NZ 3.60 cents per share
Imputed amount per Quoted Equity Security $NZ 0.00072607
Record Date 10 June 2021
Dividend Payment Date 25 June 2021
Current period Prior comparable period
Net tangible assets per Quoted Equity Security $1.77 $1.39
A brief explanation of any of the figures above necessary to enable the figures to be understood The financial statements attached to this report have been audited by PricewaterhouseCoopers and are not subject to a qualification. A copy of the auditor’s report applicable to the financial statements is attached to this announcement.
Authority for this announcement
Name of person authorised to make this announcement W.A. Burns
Contact person for this announcement W.A. Burns
Contact phone number (09) 4840352
Contact email address enquire@kingfish.co.nz
Date of release through MAP 27 May 2021
Audited financial statements accompany this announcement.
For immediate release:
27 May 2021
Kingfish delivers a record result
•Net profit after tax for year ended 31 March 2021 $142.7m
•Total shareholder return * +65.1%
•Adjusted NAV return (after expenses, fees and tax) ** 41.1%
•Dividend return *** +7.7% (13.48cps)
NZX-listed investment company Kingfish Limited (NZX:KFL) today announced a net operating after tax profit for the year ended 31 March 2021 of $142.7 million, in contrast with last year’s COVID-19 impacted profit of only $1.7 million. The result, driven by the recovery of key portfolio stocks, demonstrates the sharemarket recovery post the initial COVID pandemic shock, which had materially impacted Kingfish’s prior year March 2020 result.
Key elements of the FY21 result include gains on investments of $150.5m, dividend and interest income of $5.4m, offset by fees and expenses of $13.2m.
The Kingfish portfolio achieved a gross performance return**** before fees and expenses of +46.0% and an Adjusted net asset value (NAV) return** of +41.1%, compared to the S&P/NZX50G which reported +28.2% for the 12 month period. Total shareholder return* of +65.1% included share price increase, dividends paid, and the impact of the warrants that were exercised during the year.
In accordance with Kingfish’s quarterly distribution policy (2.0% of average NAV per quarter), the company paid a total of 13.48 cents per share to shareholders during the year ended 31 March 2021. On 27 May 2021, the board declared a dividend of 3.60 cents per share, payable on 25 June 2021 with a record date of 10 June.
Chair Alistair Ryan said “Kingfish has experienced a year of recovery after the COVID impacted performance of the previous financial year. The Manager’s focus on investing in quality and growing companies has again demonstrated the benefits of active investment management and rewarded shareholders with very strong returns.”
Kingfish’s Manager, Fisher Funds, will be paid a performance fee of $6.2m plus GST, as the Kingfish portfolio achieved a return in excess of both the performance fee hurdle (the change in the Bank Bill Index rate plus 7%) and the High Water Mark (the highest net asset value at the end of the previous financial year in which a performance fee was paid, adjusted for changes in capital). The performance fee earn rate was renegotiated down from 15% to 10% in FY19 and capped at 1.25%. The performance fee cap applies for FY21.
Senior Portfolio Manager Sam Dickie noted that “It is rare as investors that we get to test our investment process in very different market conditions over the course of a year. It was pleasing to see Kingfish outperform the benchmark index in each of the distinct market phases.”
For further information please contact:
Corporate Manager
Kingfish Limited
Tel: (09) 484 0352
.............
This is why some of us are willing to break our own investing rules, and accept the high management/performance fees. As long as they continue as they have been, I’m a happy long term holder.
As of yesterday 17% premium to NAV
Must be a record high?
I think that is a record. Just a thought...its really easy to replicate their KFL holdings and relative weightings and there are no overseas tax implications to worry about, unlike with replicating Barramundi and Marlin portfolio's which will involve purchasing shares on overseas bourses and considerable CFC and FIF accounting compliance work, (much harder).
That said, I can understand why people have stuck with them over the years, its easy diversification, tax free distributions of 2% per quarter, regular warrant issues, nice lunch at the annual meeting and last but certainly not least, decent market outperformance (even after fees and expenses) in recent years.
I have used that strategy about 20 years ago. I bought into MFT, RYM, FRE and a couple of other stocks that KFL were bullish on. Never regretted it. Sold MFT too early but that's life
The premium to NAV is eye watering but people want the 8% dividends and have nowhere else to park their money
I see SPK has an attractive div yield if that's what you are chasing
Expecting to see KFL new warrant issue announcement in coming qtr ...July to Sept . So now maybe the time premium starts expanding slowly to peak before it goes ex - warrant .
Can someone please help me understand this? The $0.15 DRP remainder from previous dividend + the $1.95 DRP remainder carried forward, equals more than the strike price. Shouldn’t they have given me 44 shares? Sharesight thinks so :confused:;)
Attachment 12664
On the face of it seems that 44 shares
But I think it's all about calculations being done to 4 decimal points
Bloody maths eh
The 85.64 plus 0.15 from last time is 85.79 which entitles you to 43.9998 shares ...so 43 is what you get and the .9998 is carried forward to next time
If next DRP is 2.4o say you won't be getting that extra share then either:( .....
At least they carry forward remainder credit for part shares to be allocated in the future, many companies don't !
MFT up almost 10% since the lockdown ....FPH more then that ....IFT is holding steady ....thats almost 52% of KFL holdings ....So maybe KFL NAV will jump big time on coming Thursday ....Expecting around 1.85 maybe !!!
3.52 cents dividend also round the corner !! KFL is a great long term hold :t_up:
Fully agree and thats what is supporting my retirement ....Its the best buy and hold of my life ...tax free plus no need include or file IR3 ...so total buy and forget and just enjoy direct credits every 3 months to bank ....what more a retired person need for financial security !! :t_up:
PS : Capital is not only preserved well but appreciates also most of the years
I've been retired for years on a large portfolio of this trifecta along with a healthy slice of LPTs. I didn't pay today's prices either so the NTA yield is considerably higher.
I'm not even 60. Of course the imputation credits are wasted in my case, but umm you have to make profits to get any in the first place of course.
The critics normally chime in here...
If you have $1m invested you would take the DRP shares at 3% discount each quarter and concurrently sell on-market via Jarden or whoever. The brokerage is a reasonable sum less each quarter than the value of the discount. So tax free return is even higher.
Thanks Beagle. But Im not bragging. Like any real investor I've made big mistakes and I still live with some of these today but I keep these to remind me of the consequences of rash decisions and herd followment (new word) as a younger investor.
I follow these pages to question my own thinking and learn from others. I'm a better investor for it.
Still no Merc tho ;)..I'm still waiting on the business case...
Yes...the age old conundrum. While its great to get an awesome return on one's money one is best not to lose sight of the fact that you can't take your money with you when you die.
Just for you mate, but maybe for me too ;) https://www.youtube.com/watch?v=WKrNCVSdefA
Yeah I know the Egyptians tried but they all got robbed, later.
I lasted 12 seconds on the vid sorry ;)
Look I'll tell you story. When I was in my early 20s my dear ole dad who was an unqualified accountant gave me a piece of wisdom that I've never forgotten.
One day I had my head under the bonnet of some piece of British automotive ditritis (insert any name here..there were many) that we all drove in the 70s fixing yet another problem. My old man who was helping me said to me at the peak of my frustration " well son there are two types of people in life". I replied "who are they dad?". He took a long drag on his pipe, pausing for effect as was his style, and eventually replied..
" rich pedestrians...and poor motorists".
My course of my life changed that day..
Question from a comment that arose on the MFT thread about KFL distributions.
If KFL includes capital gain as part of a dividend payment doesn't it need to withhold tax on that distribution? Or is it a non-taxable part of the total distribution as implied in the quote? Just would like confirmation of how they make up their distributions.Quote:
PS : Also capital gains for funds are clearly tax exempt while for individuals its taxable if trading . So KFL can pass on capital returns tax free as part of quarterly dividends
Its dividend has two parts ...Excluded Income with not any imputation credits attached ...this is capital returns part ...Not Taxable as per note written on dividend advise
Second part is dividend which has imputation credits attached @ 28% which can be included in IR3 if it suits u or this also left out if u are an individual NZ resident as per note on the dividend advise
Hope that clarifies
You raise a good question, thank you. Doesn't apply to me as I simply build up my shares but if someone is taking shares in lieu of dividend with the express intention of immediately reselling them and working the 3% discount for a quick gain on sale, it follows that their express intention was to acquire shares with the immediate purpose to sell them at a 3% profit (or thereabouts depending upon market share price on the day of sale) and therefore the gains made are taxable income as the intent behind the acquisition and disposal of the shares is crystal clear and was done for profit.
When you are in a DRP you still receive initially a cash div but the company uses the cash to purchase a certain number of shares to you and you forfeit the cash. The new shares are technically a Buy and should be recorded as such in your portfolio management system.
Buying to Sell in a short time frame is taxable activity but keeping the shares for say 6 months would probably pass.
'Intention' is everything to IRD and it's up to you to self declare what you're doing.
My practice is to sell, mostly after the ex date, enough shares to satisfy my requirements for funds to expend. Clearly the shares sold are not those " bought " via the dividend as they are in fact not yet allotted or issued, and the number sold need not exactly equate the future anticipated dividend receipt. The cash actually comes in at T + 2 in the normal manner after the sale is made. But I also disagree that the company uses "the cash" to purchase a certain number of shares " to you ".The DRP shares are always new allotments ( increasing the companies total equity shares on issue and requiring a Capital Change Notice announcement to NZX ) or transfers made from treasury stock ( ie shares in its own stock already held by the company ) although some companies do, in a relatively short window of time, buy the equivalent shares on market as new treasury stock to avoid the dilution effect.
You can get confused because of the way your broker ( eg Jarden ) sets up it's IT to create the ability for you to display your portfolio of holdings. To add DRP shares received to your existing holding you do apply " Buy " from the drop down box of options.
Even if u sell after getting your DRP shares to the amount needed its not simple 3% difference which is short term trading profit income because of FIFO rules of IRD ....First in first out will make sure that capital gains income will be counted from your original lot share price ....IMO
Interesting discussion. One idea might be to take shares in lieu of dividend each quarter and once a year sell enough shares that may or may or may not approximate the total shares in lieu of dividend issued during the previous 12 months, but sell whatever you need for income to live on.
If one followed such an approach, (which in no way I am guaranteeing is tax free), on a trifecta of holdings in the KFL, BRM and MLN companies you'd get three lots of income per annum which could be managed to be 4 months apart and still ostensibly take advantage of the 3% shares in lieu of dividend discount. Just an idea...for what its worth.
If its all too hard just take the cash each quarter.
Also possible if it suits individual to use imputation credits attached to offset small gains from 3% discount . Most of the listed PIEs imputation credits are not used by investors as they dont need too . But may lead to lots of paperwork for small gains
Here its noteworthy that included part of income from them is very minuscule compared to total payouts ...so even if u getting say $ 100,000 dividends out of them ....Actual included income with imputation credits attached maybe just $ 25000 ...all taxed @ 28% ...leading to excess credits if u dont have any other incomes to boost your slab rates
Potentially also relevant to this discussion is the practice of the NZ Share Registries, Computershare and Link respectively, and the Holder Statements they issue reflecting changes to a customer account.
Computershare records a Buy addition to a holding as " Purchase " and a Sale subtraction as " Sale ". In neither case is the price at which the transaction occurred recorded ( or, given a transaction can be concluded at more than one price via a series of partial fills, the averaged price ). You have to refer to your own Contract Note from your broker to identify that. On the other hand an acquisition via a DRP is recorded as " Reinvestment " and the price at which the shares were acquired IS helpfully stated ( the same as it is on the related Dividend/DRP Notice ).
Link Market Service simply record both Buy and Sell transactions as " NZX Trading " although it is of course clear from the Holder Statement numbers whether you bought or sold. Again the price at which that transaction occurred is not shown. I don't have access to a Link Holder Statement where a DRP is offered and taken but the practice is likely to follow that of Computershare, because logically it can't be referenced as " NZX Trading ". Technically there is no " Buyer " and of course no " Seller " either involved in being allotted DRP shares.
Unless you are a Trader for IRD purposes ( and I have a Company to do that activity ) I can't see that selling a portion of your personal shareholdings at any time for funds for living expenses or to meet commitments means you derive taxable income.
The Company has already paid the tax on your dividend and the IRD already this & how much
https://www.ird.govt.nz/income-tax/w...g-requirements
With KFL nav up 8 cents in last week ...SP is also following nav ... It getting big help from MFT / SUM last week....now FPH and IFT should bring it up next week
Its portfolio is perfect for all seasons ...has all flavours for every taste . :p
MFT not done yet ...MFT = $ 100 is KFL = $ 2.15 :t_up: