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LLOY - Share buyback 2019

lse:lloy

#442

I have followed Eadwig s posts for years, some on here, some on another smaller board.
The last thing he is is a troll.

Always well reasoned posts, which he has obviously researched well, on various subjects.
Although I am for the most part a scalping trader working on price action, always useful to have someone post some deep fundamental/macro info.

That is me on the subject for now.

soi


#443

Well said

Fully agree

You have to be able to agree to disagree sometimes without resorting to abuse nor is it safe to assume someone is a troll because you argue

There is no right and wrong after all, just opinions. Eadwig’s are usually worth paying attention to, actually most people here have a useful and valid opinion and it will teach you something if you are able to keep an open mind

I fundamentally disagree with Soi sometimes and question his perspectives but he is right a lot of the time

It is even OK to get quite worked up mcgrimes but if you can try and resist the idea that is personal, there ARE people who will wind you up for fun if you get mardy


#444

Calm Down all

Its all one big game, you do know that :wink:

Its a way of moving money from the impatient to the patient investor

Just turn off if you don’t like what people post… everyone is posting for a reason

There are NO charitable or Good Samaritans around here :slight_smile:


#445

I think that says more about you than other posters.

Many give up time and effort and valuable research to answer questions posed here. Not as many as once did, but that is because the community has been contracting for years. That’s because the majority don’t post at all, just read and give nothing back.

That’s a shame, these boards should be a tool for private investors to help one another. Outside of diversification its about the only free lunch you’ll find in the investment world.


#446

Last 12 months or so IMHO there is clearly a clique. Now here this Billboard and if you disagree you get reported and banned … long term investors are not in with the in crowd and are consistently bullied .


#447

Shame that is your view, more an indictment on you than others.
Shows you to be selfish and naive.

Years ago I used to trade both the DAX & SnP intensely. Very successful for a fair length of time.
The best trader of the DAX was a iii poster Mak Jagger.4 others including myself also doing OK with it but not matching his hit rate.
Yet, despite obviously being busy, ask him a question, he would help.

I ran in to difficulties with an SnP trade, was long and underwater, wondering whether to give up.
Mak had spotted a tiny little gap up higher that I had missed," there is your escape "
He was right, closed out for modest profit after having been prepared to take a loss.
The poster chartwizard also helped with some long very insightful posts.

Neither post here any more.

There was an investor stuck with a horrible DRAX holding. The poster/trader Taz actually went in to long detail of entering a short position to stop the rot and buy time.
Taz was not everyone s cup of tea, I always had respect for him.
He helped, he was not even trading DRAX, helped for no reward.
He got 51 upticks for his posts.

He a very hard/calculating trader, yet gave up time to offer help.

I would help someone if I could, I also am not shy of asking for help if there is something I am uncertain about.
Most of humanity is good.

Think on that

soi


#448

Sorry I think you are wrong.
I have not seen anyone get bullied for views on LLOY.
Nobody reported or banned.

ON BW3 it gets a bit " hot " at times.To be expected.
On LLOY itself, no.

soi


#449

I am anything but selfish and naive. Everyone is entitled to their own opinion and should not be put down or laughed at just because their opinion differs. Even if only one person has a different view it does not make them wrong or right. Most of humanity is good I totally agree. But some is not. We all want to make a bit of money for what we have toiled for. Appreciate whilst you may not agree with my opinions they are just that an opinion. I am passionate about my shares and am entitled to a view.


#450

#451

As usual with the Telegraph, you cannot read the online article unless you are a subscriber. Are you able to copy and pasted the text?

Cheers,

frog in a tree


#452

Or a brief synopsis would do.


#453

Am away from my computer until late this afternoon, will post the text then. I thought one is allowed to read a couple of articles before one has to log in.


#454

YUes please, give us tour precis Bowman and then it will make digestible sense

btw is a synopsis a form of nasal decongestant


#455

I dunno. I think a ‘brief synopsis’ may be a form of tautology.


#456

The latest events at Lloyds Banking Group are hardly welcome but they do shed light on the thorny matters of dividend cuts and share buybacks.

The bank, we hasten to add, has not announced a cut in its divi but it has suspended a share buyback programme that was supposed to consume £1.75bn of its surplus capital. So far £1.15bn of that money had been used to repurchase its stock.

We have said several times that while share buybacks can seem annoying or irrelevant to private savers, they can in fact be beneficial for income investors such as readers of this column. Events at Lloyds this week seem, to Questor at least, to bring a new dimension to the relative merits of ordinary dividends, special divis and share buybacks.

What did happen this week? The bank announced that the weekly number of inquiries about PPI mis-selling received in the run-up to the claims deadline of Aug 29 had increased dramatically from 190,000 to 600,000-800,000. As a result Lloyds said PPI was likely to cost it £1.2bn to £1.8bn more than previously thought.

It was in response to this that the share buyback programme was suspended.

Let’s imagine what would have happened if there had never been a share buyback scheme and the bank had used its surplus capital to boost its dividend. In this event, we would probably now be reporting a dividend cut rather than the suspension of share repurchases.

This would have been seen as a major setback and a public relations disaster for the bank. In all likelihood there would have been calls for the chief executive to walk the plank. The share price would probably have fallen substantially. There has been none of this reaction to the abandonment of buybacks – they simply don’t have the same visceral significance for shareholders.

In Monday’s announcement the bank went out of its way to reassure investors that the dividend itself was safe. It said: “In line with normal practice, the board will give consideration to the distribution of surplus capital at the year end and continues to target a progressive and sustainable ordinary dividend.”

Sign up to the Telegraph’s Questor WhatsApp group for daily alerts and exclusive audio updates
When we have written about buybacks in the past, usually in connection with Lloyds and Next, we have stressed how they can be a fruitful way to use surplus cash, as long as shares are repurchased cheaply.

The effect then is to concentrate profits into a smaller pool of outstanding shares, with corresponding benefits for earnings per share and hence the capacity to pay dividends.

What these developments at Lloyds show is that a buyback programme can have an additional function as a kind of safety buffer for the dividend: if unexpected costs arise, buybacks can be curtailed before the divi is threatened.

Read Questor’s rules of investment before you follow our tips
Dividends can be a valuable discipline for company boards but there is a reverse side to that argument: a determination to avoid a cut could prevent directors from taking steps that, while unwelcome, are essential for the business’s health or even survival.

An option instead to limit buybacks offers a much less contentious route to aligning what flows out of the business with what it can safely afford.

We should also mention special dividends, which are another means to give boards more flexibility, as long as they don’t become so regular as to be seen as routine.

Another option is for boards to announce a dividend policy that automatically adapts to changing circumstances, such as a commitment to paying a certain percentage of profits. This way the divi may go up and down but investors will have been alerted and can take comfort from the existence of a consistent framework.

This column sees all these tools as welcome alternatives both to dividend cuts themselves and to the “avoid dividend cuts at all costs” mindset, both of which can cause so much damage.

Edit: Questor in full. I hope 20 years or more subscribing allows me to do this once in a blue moon.


#457

I thought it was a windows anti-virus software


#458

This cancellation of share buy back to me says they’re cash strapped and is not a good sign. Big decisions like £2B are not thought upon a whim.

However I do not read technical and could be wrong. Perhaps tesco was more important than the buyback but for that to be the case, tesco would of had to come as a surprise. I doubt that’s the case.


#459

@pelim,

Thank you for posting the article, it saves me having to do so.


#460

Ok thanks for the Questor which is fair comment, except that LLOY would have been quite capable of making another special dividend payment … having not repeated the 0.5p specials of 2015 and 2016 the total payout in 2017 had stalled anyway, while allowing them to say the ordinary dividends were progressing. We could have had this buyback cash on another “one-off” basis, or two.

My anger is that this prospect would likely have sustained the sp much more effectively in the short term than the buyback programme. Only in the very long term (and that is fine as I am a long term investor) will we appreciate the benefits of the buyback, noting that at the rates being carried out about half the benefit is diluted because LLOY keep issuing new shares at astonishing rates.

They are not so much cash strapped as having just committed £3.8B of “inhouse resources” to buy Tesco mortgage book. And constrained by solvency measures. They have cut the buy back and presumably curtailed plans for future buy backs in order to preserve the ordinary dividend and to continue other planned investment. It was a prudent move and appropriate given the large sting in PPI’s tail.

I suspect LLOY have not curtailed the practice of issuing hundreds of millions of new shares to staff though. Do you imagine a pull back on senior pay/pension after this bad news, and while the sp is languishing 15-20% below par.

No. It is just we private shareholders taking the (s)hit. Again.


#461

Its a bit of a balancing act for LLOY I reckon. In my view share buybacks are an essential part of managing the sharebase to prevent the shares in issue from growing like topsy.

As regard to shares issued as staff bonuses I would be in favour of these being purchased from the market as require rather than new shares being created.

Labour’s John McDonnell has proposed imposing restrictions on excessive bonuses for the likes of top bankers. I would support this as the rewards paid are massively disproportionate to the skill and effort expended by the staff. All of this comes out of the pockets of customers and shareholders.

Cheers,

Frog in a tree