Brexit, UL and RDS.A taxation

[RyanCMason]

Good Evening everyone,

I haven't had a chance to follow-up on the stocks UL and RDS.A lately and I wanted to know if there has been any official update on the status of the future tax withholdings?  As it stands now, I Have RDS.A and UL in my brokerage account and RDS.B in both my IRA's and Roth IRA's.  I was under the impression that Royal Dutch Shell will remove the Scrip dividend at some point in 2019/2020 but with Brexit I didn't know if that changes anything in regards to the tax withholdings.  Any thoughts or links would be great as I plan to do more research in the coming weeks/months.  Thanks!

[crimsonghost747]

Interesting question, unfortunately I can't help much with it. I haven't heard anything yet but I would assume that this info is simply not available as the terms of Brexit are still being negotiated. The tax treaty between the UK and USA should decide how much is being withheld, better look to see if the tax treaty will be changed or not.

However, the scrip dividend was already cancelled by RDS.

Offtopic: Regarding the scrip dividend.
Does anyone else understand the point? I mean I get it, they didn't have much cash and they wanted to keep their history of not cutting the dividend. But basically what it did was increase their sharecount when things were bad and the share price was around 20e-27e. And now that everything is good, they will be buying back those shares from the market at 30e+.
I think the company lost insane amounts of money doing this, simply because they wanted to keep the streak alive. I guess this is a good example of why companies can be seriously hurt when they feel like the dividend can't be cut, even if the fundamentals are telling you to cut it.

[Kerim]

(07-09-2018, 09:06 PM)crimsonghost747 Wrote: Offtopic: Regarding the scrip dividend.
Does anyone else understand the point? I mean I get it, they didn't have much cash and they wanted to keep their history of not cutting the dividend. But basically what it did was increase their sharecount when things were bad and the share price was around 20e-27e. And now that everything is good, they will be buying back those shares from the market at 30e+.
I think the company lost insane amounts of money doing this, simply because they wanted to keep the streak alive. I guess this is a good example of why companies can be seriously hurt when they feel like the dividend can't be cut, even if the fundamentals are telling you to cut it.

This is such an interesting thing. As committed as I am to DG investing, I've always thought that it doesn't make a lot of sense from a corporate perspective. Much more sensible to have a stated policy of paying out a specified percentage of profits as dividend. This avoids the need for debt or accounting shenanigans just to keep a streak of dividend growth alive. That said, I'm happy with the (general) predictability of the dividends and raises, and it does to some extent motivate management, I suppose.

[rayray]

(07-09-2018, 09:06 PM)crimsonghost747 Wrote: Offtopic: Regarding the scrip dividend.
Does anyone else understand the point? I mean I get it, they didn't have much cash and they wanted to keep their history of not cutting the dividend. But basically what it did was increase their sharecount when things were bad and the share price was around 20e-27e. And now that everything is good, they will be buying back those shares from the market at 30e+.
I think the company lost insane amounts of money doing this, simply because they wanted to keep the streak alive. I guess this is a good example of why companies can be seriously hurt when they feel like the dividend can't be cut, even if the fundamentals are telling you to cut it.

I guess a scrip is like an "IOU" from the participating company. The company issues new shares in lieu of a cash dividend, (1) They preserve their cash reserves (2) They can avoid a corporate tax on dividends paid (3) The current dividend stays in tact

Only about 25% of shareholders participated in the RDS Scrip Program, and if I'm not mistaken, this is the second scrip program that RDS initiated in the last 10 years or so...they must have seen some benefits to do it again

Scrip programs tend to be used primarily by foreign based companies, there has to be something to this...taxes?    I'm just guessing