EVRAZ Dividend- Have I got this right?

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5th Mar '22 by Wayneskie

10 comments 1014 reads

Firstly this is not about the morals, or risks of buying Evraz (LON:EVR) this week. It's about the mechanics of the transaction....

If for example

Company A has 1000 shares at 60P each

Company A has a value of £600.

That Company goes XD on 10/3/22 and pays a $0.50 (38P) Dividend on 30/3/22.

On XD day the value of the company is now 60P minus the value of the 38P dividend.

So the Stock price would be 22P on that day, meaning the value of the company XD is £220.

This seems pretty clear in my head, but have I missed something here?

Obviously, there are many many other factors, but in theory this should be the position?

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About the Author

Wayneskie

Premium Member

10 comments

Albertos

5th Mar '22

Your logic is correct all other things being equal.

FWIW, I personally doubt they will pay the dividend - they do have the option to reverse.

Phil

illiswilgig

5th Mar '22

Good question.

1000 shares at 60p means that the cost of the shares is £600.

If you like - that is the current market value of the shares - not the actual value of the company. If anyone knows what that is now.

The value of a company is rarely exactly the same as the market cost of the shares even in normal circumstances.

I don't know what the value of the company is - in this case there might be wildly different valuations - in the short term the cost of the shares is more determined by the votes than by the weight ?

Assuming the the current market capital of the company is much different from the value of the company then the payment of such a large dividend, if it happens at all - will not have the same effect upon the price of the shares as it will upon the value of the company? Under current circumstances the outcome of events and the passage of time will likely have a larger impact one way or the other.

Hope I am making some sense,

cheers

Mark

Andy Sav

5th Mar '22

And then there was this RNS late on the 3rd of March:

"http://newsfile.refinitiv.com/... Further to the notices: 'Evraz (UK): Stock distribution of Raspadskaya (Russia)' issued on 03 February 2022 and the 'Treatment of Russia in FTSE Russell Equity Indices' announcement on 02 March 2022. FTSE Russell announces that the price adjustment consequent to the divestment of Raspadskaya (Russia, B5800Q2, GEIS Mid Cap) by Evraz (UK, B71N6K8, FTSE 100 Index, GEIS Mid Cap) which was implemented to the FTSE Russell indices at the open on 14 February 2022 will be reversed, effective at the open on Monday 07 March 2022, in order to assign a value of zero to the distribution in light of the circumstances detailed in the 02 March 2022 notice referenced above. Accordingly, the open price of Evraz will be adjusted to include the previously calculated distribution value of GBP 1.8875197296, with it subsequently reverting to its market price immediately after the open. For the avoidance of doubt, no further adjustments will be implemented, regardless of any restrictions being lifted at a later date."

Sounds like they are not demerging the coal arm of Evraz (Raspadskaya) and instead, are going to undo the price reduction applied on the 14th of Feb. I think this means the share price on Monday the 7th of March will be 60p + 188p = 248p. Unless I have miss understood the RNS?

Wayneskie

5th Mar '22

Sure, value and price are almost never the same. But will the shares drop to 22P? (Assuming a price of 60P XD). It's a bit of a quandary..

Westway001

5th Mar '22

Surely if the company has a balance sheet value of say £50,000 and makes an annual profit of £5,000, declares a dividend of 50p per share on its 1,000 shares and has a share market value of £5, the fact that the share market price might (for whatever reason) drop overnight to 22p does not mean that the company is only worth £220.?

Its balance sheet value of £49,500 (£50,000 less the aggregate dividend of £500) might be in cash which is still worth £49,500.

The share price only reflects what someone will pay for the shares on that day.

lightningtiger

8th Mar '22

You have got the value wrong. The market cap is currently £1.12b.

It was about £5.0b last year, when the share price was about 400p.

Now the share price is about 80p (aprox 20% of what it was) and paying an XC (X capitalisation) of about 50p. When the share price drops, the dividend percentage increases & visa versa.

So if it was paying a dividend last year of 50p on a share price of 400p = 12.5%.

Now it is about 50p/80p = 62.5% .

Wayneskie

9th Mar '22

Sure, that makes sense. I am interested to know what the share price will be tomorrow, let's see....

lightningtiger

9th Mar '22

The Board has decided to cancel the dividend after all that. I thought they had a legal obligation to pay it.

lightningtiger

10th Mar '22

Not much uptick in the share price currently, considering they are not paying out the $729M div @ $0.5 per share.

Logical David

10th Mar '22

Evraz shares have been suspended as of today from trading on the FTSE due to the UK sanctions being applied to Roman Abramovich and his large holding in the company.

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EVRAZ Dividend- Have I got this right?

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Wayneskie

10 comments

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