It's actually been a while since I purchased shares of VZ, 08/02/12 to be exact. I was waiting to see how the buyout of the remaining stake (45%) of Verizon Wireless from Vodafone (VOD) would shake out.
There was a news release Feb. 19th. So apparently for every share of Vodafone I own, I'll receive .26 share of VZ and an amount of cash that will be determined Feb 21st. If you read the news release it actually says .026 shares but each ADR is equal to 10 shares so I'll receive 26 share for every 100 owned. This will happen on 02/24. Since I own 200 shares of VOD, I'll receive exactly 52 shares of VZ. I currently own 90 shares of VZ and this will bring my stake up to 142 shares. This should happen by the end of the week.
The second announcement was the amount of cash per VOD share to be paid out to shareholders. You can find this release here. For every U.S. ADR held , you'll receive $4.90. This means I'll receive $980 for my 200 shares.
Now where does this leave my shares of VOD?
Well also in the news release Feb. 21st, VOD has stated that investors will receive exactly 6 new shares for every 11 shares owns. It's basically a reverse split. Apparently you don't get any fractional shares. In my Schwab account I already noticed I have 54 shares of VOD now instead of 100. I should have 54.5 after the 6/11 conversion. I should get some sort of cash payment for the fractional shares though. The new value of VOD should drop to reflect this consolidation process and will begin trading on Monday. I may consider adding more VOD once all of this plays out by the beginning of next week.
So last Thursday I decided to purchase another 58 shares of VZ to even out my position with 200 shares. I paid $48.24/share for these shares. VZ has been pretty good to me, paying out a consistently higher dividend and providing some nice capital appreciation since owning them.
These 58 shares will add another $122.96 to my annual dividend income.
Hi AII,
ReplyDeleteoh yes - the VOD-Transaction!
Yesterday I have also seen the transaction in my portfolio.
I have written about this in my blog.
But I think - the Vodafone-shareholder has no advantage from this transaction, or?
I have now 9.731 VZ-Shares and instead of 370 VOD now I have only 201 VOD.
Perhaps it would have been better to sell all VOD prior to the transaction?
Best regards
D-S
Hi D-S,
DeleteThe only thing that sucks is that I'll have to pay some capital gains on the cash distribution that comes April 4th. The reverse split and share exchange should be a wash.
Take care!
Hi AAI,
ReplyDeleteThank you for posting this information, there are a lot of VOD holders out there. I actually still think that the New VOD has pretty nice future ahead, with exposure to emerging markets, plus leading position in many other national markets in Europe ( which is going to recover sooner than later afterall).
Actually with Sharebuilder, I am scheduled to receive fractional shares in the New Vodafone, plus fractional shares of VZ as well. So the split is already accounted for there.
Fidelity and MerrillEdge will probably post the transaction tomorrow or Tuesday. Will let you know if they allowed fractional shares ;-)
Best Regards,
Dividend Growth Investor
Hi DGI,
DeleteI figured there's a lot of people that will be going through this process so I posted what I knew so far. I agree with you and I do like the new VOD. I added some shares this morning.
Well apparently Schwab just pays me in cash for the fractional shares after talking to them this morning. E*Trade gave me the shares. It's not a big deal except figuring out my cost basis and paying capital gains.
I'd be curious what other brokers are doing. I have two with VOD and they both handle is differently.
Thanks for stopping by!
Sounds like you've spend some time to figure all of that out! It would be interesting to see how you calculate yield on cost for VOD and VZ after this!
ReplyDeleteHi FerdiS,
DeleteI've been expecting this for a while but it was just recently that more exact information was released. I ended up adding more to VZ and VOD. I'll probably trust my broker to make the cost basis adjustments but I will probably double-check them to be safe.
Thanks for stopping by!
I wonder why VOD stock price is still the same as before split as of March 3rd ? Because of this I am now showing a loss on VOD ?
ReplyDeleteWhy hasnt its price adjusted lower, its still trading for $40.xx (was $41.xx Friday) ? Shouldnt it be way lower due to split ?
Hi Irwin,
DeleteThere was a 6/11 reverse split with VOD shares. Even though the price is the same, the shares outstanding and market cap are not any more.
My broker told me they are still working on cost basis, I'm curious how they end up doing it and I'll probably check. I'm still trying to figure out the exact method for calculating cost basis.
As for the shares of VZ and cash payment issued by VOD, it sounds like both will be counted as a dividend payment. There's also dividends in lieu for any fractional shares that have to be taken into account also. I have one broker that is giving me cash in lieu and another that gave me the fraction shares so it's a big mess.
yeah I am not sure how to calculate the cost basis also. I contacted my broker and they went quiet.
DeleteAt the moment since the price is the same for VOD, its showing me a loss instead of profit that was the case before. so really am confused how to calculate it.
Hi Irwin,
DeleteI started crunching the numbers and have figured out how one of my brokers determined my cost basis for VOD so hopefully this will help.
I originally purchased 100 shares of VOD for $27.0585/share or $2705.85. After the 6/11 split this would have left me with 54.5454 shares but my broker didn't pay fractional shares. Instead I received 54 shares of the new VOD and cash in lieu of .5454 * $40.85 = $22.28.
I need to look up how the cash in lieu is treated for taxes.
Since the reverse split was 6/11 you need to adjust your original cost basis by 11/6. So if you take my original cost basis of $27.0585 and multiply by 11/6 then you get $49.61. This is exactly what my new basis is for the shares.
Are you saying that the cost-basis of Verizon will be 0? That it is truly a dividend and all the cost-basis remains with Vodafone shares?
DeleteBTW, Tradeking gave a bit more dividend strangely enough at the rate of $4.93 per ADR. Also, the partial sale proceeds haven't come in as yet. I wonder what's up.
ReplyDeleteHi Gaurav,
DeleteThat's right, the new shares of VZ are considered a dividend so will be $0 cost basis. That's how both of my brokers are calculating it.
What's strange is that I've received the cash-in-lieu from one broker a week ago and E*Trade claims they are still waiting on the cash-in-lieu in order to pay me. I did receive the $492.80 for 100 shares in each account though as of 03/04 as well as the VZ shares.
I believe the $4.90 was an estimate and it depended on where prices were trading on a particular day to lock in the exact figure. So it looks like $4.928 was the exact amount paid per ADR. I may have to do a new write-up on all of this and how the cost basis will be calculated for everything.
The VZ shares are 100 % taxable. When you get you 1099 in 2014 for 2013 it will show VZ as taxable. Only way to offset is sell the VOD that is showing at a loss. Happened to me before when Supervalue bought Albertsons.
ReplyDeleteThere was a Barron's article last year that claims this will all be a qualified dividend. Where did you get the 100% taxable information?
DeleteSee below:
http://online.barrons.com/article/SB50001424052748704287804579042961930769706.html
I had this exact same thing happen to me with Albertson/ Supervalue deal. Did not know until the 1099 came in the mail. If you take the value of your VZ and putt it against what now shows as a loss in VOD it will be about what your gain was before the split.
ReplyDeleteHi Brian,
DeleteYou may be right. I just asked Charles Schwab and here's what they told me:
"The guidance we have been given is clients that received cash and VZ dividends will be taxed as cash with a basis of $0.00."
However, they noted that this wasn't fully verified yet by VOD.
Not advice,check it on your own case. Just saying what my experience was before
ReplyDeleteI appreciate the information as I'm still not 100% clear. I do hope it will be treated as a qualified dividend though as that article suggested. I didn't see a definitive answer on the VOD website.
DeleteThanks for stopping by!