Question 1: How much will CBA’s dividend be? Why is there talk of an off-market share buyback?
Answer: I think CBA’s interim dividend will be in the order of 160 cents per share (see https://switzersuperreport.com.au/bank-dividends-set-to-soar-in-2021/ [1] ) . Technically, this will be down from their interim last year of 200 cents per share (which was essentially pre Covid), but up on their final dividend of 98 cents per share.
Market consensus is now around 145 cents, with a range from a low of 100 cents to a high of 165 cents. We will find out next Wednesday (10 February).
CBA has a truckload of surplus capital, which will increase as divestments complete. Further, it has a truckload of surplus franking credits – which only have value in the hands of shareholders. So, a capital return, most likely through an off market share buyback, is firmly on the cards. The only question is whether it announces it now, or waits a little longer until the impact of Covid-19 has firmly played out. Because speculation has increased, I think an announcement sooner is more likely.
Question 2: I want to invest about $5,000 for 2 grandchildren, aged 12 and 15. What is the best way to do this?
Answer: Given the age of the younger child, I would probably buy an investment bond (see attached article . https://switzersuperreport.com.au/investing-for-your-kids-or-grandkids-part-2 [2] / ).
If you want them to develop an interest in shares, I would either purchase an Aussie Shares pack from CommSec, or create your own portfolio of 3 to 5 shares for each. You will need to open accounts, which can be a little tricky, but not impossible. I covered this extensively in the following article (see https://switzersuperreport.com.au/shares-for-your-kids-grandkids-for-christmas-2020 [3] / ). If you want them to own shares directly, I would work with their parents and before you invest, get them to obtain their own Tax File Number.
Question 3: Why does Tabcorp (TAH) want to spin out the wagering division? Isn’t it a licence to print money?
Answer: Tabcorp (TAH) has been a chronic underperformer. It botched the acquisition of Tatts, and there is enormous pressure on the Board to deliver for shareholders. It has been a dog, and finally, the Board has “thrown its hands up”. The sum of the pieces is greater than the whole.
Question 4: Thanks for your detailed explanation about the Magellan Partnership Offer. I have been offered an entitlement for both our holdings, MGF and MGOC. Our holding in MGOC is larger than MGF. Which is the better option financially?
Answer: The offers through MGF or MGOC are exactly the same. You are indifferent.
- Both are an entitlement to invest in additional closed class units on a $1 for every $4 held basis;
- The calculation of the number of units you will receive will be based off their respective NAVs (Net Asset Values) on 1 March 2021;
Both are at a discount of 7.5%, and attract an associated option.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.