Tesco has declared a special dividend of 50.93 pence per share following their divestment of their Malay and Thai operations. The special is to be paid on February 26th to shareholders of record on February 12th (Friday).
Unusually the ex-dividend date is the following Monday (February 15th) which means in order to qualify for the dividend you need to be holding the shares on Friday the 12th.
In conjunction with this dividend payment is a 15-for-19 share consolidation, meaning shareholders will hold fewer shares following the consolidation. However each new share will represent a larger portion of the company.
The dividend payment will be for the number of shares prior to the consolidation.
For example, if you were to buy 190 Tesco shares on Friday 12th, you would receive a dividend payment of £96.77 (0.5093 x 190) and you would be left holding 150 shares.
Due to this consolidation (which is effectively a disguised share buyback) you would then expect not to see the usual drop in the share price on the ex-div date.
This is not unusual as Intercontinental Hotels Group typically have a special dividend and consolidation each year.
As a private investor it’s important to remember that if you’re buying Tesco for this dividend that you will be left holding fewer shares than you purchased following this dividend (but proportionally the same amount of the Tesco stock).