Tabcorp 1 for 9 share offer

[mary&mat]

Hi all,

Just wanting to pick the brains of all the share aficiondos...

Background: Purchased Tabcorp over 20 years ago when I was working there for approx $1.89/share. (Kicked myself for not selling at high of $17, but I'm in it for the long haul ). Don't feel confident in trading shares so I just stick my money in & am happy to wait til retirement to cash in.

I invest in a couple of other managed funds as I don't know the ins & outs of the sharemarket.

Q: Tabcorp are offerring a 1 for 9 deal where I can purchase 85 shares for approx $6.25.

With all the takeover talk lately, is this a good option?

At present I just do dividend reinvestment.

Thanks to all for your advice

PS Sorry if this is like a 'where should I buy' newbie query, but I really just wanted them as a tiny diversification strategy to property.

 

[alexlee]

That's only $530. Buy it, don't buy it. It's not going to affect your wealth plans much?

 

[mary&mat]

Thanks alexlee,

I know it's only $530, so my initial thoughts were 'yeah, why not?'

But it's still $530 & if I can put it to better used somewhere else, I'd rather not waste it here. (I'm a 'watch the pennies & the pounds look after themselves' kinda gal.)

I like your candidness & succinct answers too. Initially I thought you were a bit brusque, but I'm used to it now & don't take it personally I appreciate all your thoughts/insights

 

[Ridin-High]

I kick myself for selling my shares @ 6.26 a month before they went to like $7.50 lol.

I think (correct me if wrong) that its a renouncable rights issue meaning u can sell the rights to other investors

Regards,

RH

 

[mary&mat]

Oh....hmmm...the letter said something about the shares not taken up being placed back in a pool...so not sure if I have the right to sell, but it doesn't sound like it.

Do you trade RH?

 

[morpheusbushy]

If it's only around $500 just buy them.

I would stop reinvesting your dividends, and just let them pay you as income. The shares will eventually pay for itself and you don't need to worry about it until retirement.

If you want diversification in shares and don't know much about trading, buy for dividend yield in blue chip stocks and don't ever sell!

 

[mary&mat]

Thanks morpheusbushy!

But if I receive dividends as income, then I have to declare & get taxed more, yes? And as it's only a piddly few hundred, I thought reinvestment was the better option?

I'm trying to get a bit more set aside to fet into some blue chips like WOW etc.

 

[alexlee]

Thanks morpheusbushy!

But if I receive dividends as income, then I have to declare & get taxed more, yes? And as it's only a piddly few hundred, I thought reinvestment was the better option?

Whether you use dividend reinvestment or take the dividend as cash, you still have to declare it as income on your tax return. I sure hope you've been doing that.

 

[mary&mat]

Whether you use dividend reinvestment or take the dividend as cash, you still have to declare it as income on your tax return. I sure hope you've been doing that.

Yes mum!

No really, I'm very fastidious about declaring EVERYTHING! I just thought the tax paid on reinvestment (franking?) was better/lower thank if I took a payment every quarter?

 

[alexlee]

Yes mum!

No really, I'm very fastidious about declaring EVERYTHING! I just thought the tax paid on reinvestment (franking?) was better/lower thank if I took a payment every quarter?

There is no difference to your taxable income whether you take the dividend as cash or reinvest. You might get a discount to the market price on dividend reinvestment, but that's it.

I don't make it a point to declare everything. I make it a point to declare all my taxable income.

 

[morpheusbushy]

As alexlee said, you pay tax either way.

Dividends are often a much better way of earning a good return on your money.

Most people don't realise they can lose around 40-45% (give or take) in tax on interest earned from money sitting in the bank.

Franking credits mean the company has already paid a certain percentage of tax on your dividends for you. Basically, the higher the franking the less tax you pay.

 

[mary&mat]

Thanks alexlee & morpheusbushy,

So would I be paying slightly less tax then b/c the Co. has paid the franking?

Yes, point taken, alexlee re declaring taxable income

 

[alexlee]

So would I be paying slightly less tax then b/c the Co. has paid the franking?

You pay less tax on say a fully franked dividend of $500 compared to receiving $500 in interest, yes. However, there is no difference on tax payable on a dividend of $500 whether you receive it in cash or whether you reinvest it.

It's not just a matter of paying less tax. If your tax rate is <30%, then you get a refund on fully franked dividends, for example, in addition to the cash dividend itself.

 

[mary&mat]

Oh, cool. Thanks again alexlee.

So if I needed a bit of a cash injection for more IP's, I could use the cash dividends & wouldn't really be any worse off tax wise in terms of income earned?

Still getting my head around what you've said here: if tax rate is <30%, I get more of a refund than if I chose dividend reinvestment? Ie I get the cash dividend, plus 'some' back in my tax?

Sorry for the confusion, as I said, shares are not my strong point, but I'm learning. thank you for your patience

 

[alexlee]

Too many holes in your knowledge, M&M. I suggest reading a book on this.

 

[mary&mat]

Yup! I know.

Have read share books, but cannot make heads or tails of them...I get the candlestick graphs & all that, but the real ins & outs are too confusing...thus managed shares & no trading!

Thanks anyway, I'll stick to property, which although complicated is exciting, & doesn't make my brain switch off like maths class!

 

[alexlee]

This is why a lot of experienced people don't bother with newbie questions.

1) The newbie starts asking some questions that just don't make sense, or aren't important. Experienced people can see through the post to the thoughts, or lack thereof, of the poster, because they've gone through it themselves.
2) Someone tries to explain the basics.
3) Newbie doesn't understand the explanation, and asks some more questions that don't make sense.
4) Someone suggests they go out and learn the basics.
5) It's just too much work and the newbie gives up.

In this example, graphing and candlesticks and trading are all irrelevant to dividend franking. One can buy shares for yield, and not need any graphing or trading or whatever. Funds also have distributions with franking credits, and some focus on capital growth. If you don't buy shares because you don't understand franking, buying a fund doesn't help you either. Understanding franking, for example, allows much more effective use of your family's tax situaiton.

Dismissing the entire asset class because you don't understand one aspect is like saying you won't invest in resi property because you don't know how to fix toilets or can't handle paperwork. But then to say one invests in funds because one doesn't understand trading and dismissing dividend franking, is like saying you won't buy resi property because you can't fix toilets, and don't like paperwork, and then buying a PPOR anyway even though the PPOR will presmuably have a toilet as well. And lots of paperwork.

Now, there's no requirement that one invests in property or shares or whatever, but if you are genuinely interested in learning about property investing (as that's what this forum is mainly about), then you really need to sit down and study it. It's not easy, there is a lot of information to digest, but no one said this was going to be easy.

Some newbies may think they're not getting many answers to their questions, but it might be because your questions just don't make sense, or you're missing the important bits, and the experienced investors have been through the above progression enough times that they can't be bothered unless you actually show you have some basic knowledge or done some research.

Pour water into a sieve. What happens? The water spills everywhere. You'll learn much more when 1) more experienced posters respond and 2) you actually have enough knowledge to understand the answers.

 

[wobbycarly]

Pour water into a sieve. What happens? The water spills everywhere.

And the sieve gets clean.

 

[Mr. Fabulous]

Whoops, Alex already answered!

 

[Mr. Fabulous]

Have read share books, but cannot make heads or tails of them...I get the candlestick graphs & all that, but the real ins & outs are too confusing...thus managed shares & no trading!

Those aren't books on share investing, they are books on speculating. If you want to read a few good books on share investing, then read Peter Lynch's 'One Up On Wall Street' and 'Beating The Street'.