FDB ordinary shares - buy back scheme

Siamsa Sessions

Hi all,

I've asked in the farming forum but thought I'd post here too...

My mother has ‘ordinary’ shares in FBD and got a letter last week from the company, offering to buy them at €1.53.

The shares usually generate a dividend of €600-1000 every year (I need to double-check this), which is approx. 5% of the total value of the shares she holds. There is no stamp duty apparently, but I assume CGT would need to be paid if they were sold. If we sell, there is also the question of what to invest the cash back into.

Any opinions?

Are FBD steady in general? Is a 5% ROI good, bad, or indifferent for such shares? etc.

Thanks.

amacca

https://www.boards.ie/discussion/2058251850/fdb-ordinary-shares-buy-back-scheme

I can't answer much of your query with certainty but the earnings from the shares are below the threshold for taxation of 1270 so that's something to factor into the decision perhaps....to get that tax free income in most other cases you have to earn double if you are over the threshold

You will be liable for tax if the shares are sold but the amount depends on how much the shares are worth now vs what they were worth when bought...

I have no info on how steady/safe bet FBD are but they are an insurance company and if the quotes they've been supplying me with in recent years are anything to go by they don't undercharge for their services.

Siamsa Sessions

https://www.boards.ie/discussion/comment/119253483#Comment_119253483

Thanks for the reply.

The shares are around since oul god’s time so there’s no purchase cost to write off against the sale income.

I might give the accountant a shout to see if he has any insights.

Thanks again

whelan2

I asked my dad yesterday, he was saying the buy back thing really only suits those who have passed on. He said most of the people who have them are old renough now and this scheme would suit the families of those who have died. He said he gets nice dividend every year and has sold some along the way to fund college recently for us.

cython

https://www.boards.ie/discussion/comment/119253483#Comment_119253483

By "earnings from the shares", are you referring to the dividends? If so, then I don't believe the €1270 you cite to be relevant as this is specific to CGT, in that you can make disposals in any given year with a total gain up to €1270 without a liability for CGT. Dividends, on the other hand, are taxed as income and on top of normal earnings.

amacca

https://www.boards.ie/discussion/comment/119254069#Comment_119254069

Apologies....that's what happens when novice here gets mixed up. You are correct, I was thinking of the dividend incorrectly. The point I was making relates to disposals.

Could perhaps offload it in small chunks if you knew the profit that would be calculated for CGT and keep under the 1270 due to avoid tax??....and then compare that to what you get from the buyback??

Out of interest is it the 33% they are liable for or is there a dividend withholding tax at different rate....I haven't had the spare capital to dabble in anything like purchasing shares yet.

cython

https://www.boards.ie/discussion/comment/119254179#Comment_119254179

Tax on dividends is covered pretty thoroughly here, but generally speaking dividends are taxed as income and consequently at your marginal rate, so it could be as high as 52%. Irish resident companies seem to withhold 25% when paying to Irish residents, which can be used as a credit against your liability (as it's been prepaid on your behalf).