Irish Dividends v UK Dividends

[Brendan Burgess]

You should stay away from investment if you can't grasp this very, very, simple concept.

I am genuinely frightened at the prospect of people investing directly in shares when they haven’t a notion.

Hi Gordon

You put it so much more diplomatically than I do.

Brendan

 

[Mez!]

There is very little, if any, Sterling risk if you hold shares in a UK based multinational

So say I purchase a UK multinational share for £1.00 on 1st Jan 2018. 33% of their revenue comes from UK business, 33% Eurozone and 33% US. The fx rate to Euro is £1.00 to €0.80.

One year later, I sell my share for £1.00 (no gain, no loss). However the fx rate is now £1.00 to €0.70.

How am I not exposed to currency risk?

 

[rob oyle]

So say I purchase a UK multinational share for £1.00 on 1st Jan 2018. 33% of their revenue comes from UK business, 33% Eurozone and 33% US. The fx rate to Euro is £1.00 to €0.80.

One year later, I sell my share for £1.00 (no gain, no loss). However the fx rate is now £1.00 to €0.70.

How am I not exposed to currency risk?

The logic being that a weaker GBP will mean the share price increasing to reflect the higher returns from their non-GBP operations (when converted to GBP). Due to non-related factors, this does not result in 100& correlation.
Take Shell for example. If you buy their London listing or their Frankfurt/Paris listing, the price of the share will reflect the movement in their primary traded product (oil) which is denominated in USD and then converted at the going exchange rate. So, for example, if the price of oil doesn't change but GBP weakens, the UK share price would increase

 

[Gordon Gekko]

So say I purchase a UK multinational share for £1.00 on 1st Jan 2018. 33% of their revenue comes from UK business, 33% Eurozone and 33% US. The fx rate to Euro is £1.00 to €0.80.

One year later, I sell my share for £1.00 (no gain, no loss). However the fx rate is now £1.00 to €0.70.

How am I not exposed to currency risk?

There are a variety of things that feed into a share price.

But in broad terms, a company that is merely listed in the UK but earns revenues globally should not give rise to Sterling risk.

 

[Mez!]

There are a variety of things that feed into a share price.

But in broad terms, a company that is merely listed in the UK but earns revenues globally should not give rise to Sterling risk.

In the absence of evidence, this is supposition.

 

[Sarenco]

In the absence of evidence, this is supposition.

We actually have a good recent example of this phenomenon - the impact of the Brexit vote on Sterling and the relative performance of different UK-listed companies depending on where they generate the majority of their revenue.

Here's a good analysis of how things played out -
https://assets.kpmg.com/content/dam/kpmg/uk/pdf/2017/06/kpmguk50-kpmguknon50-June-2017.pdf

 

[DeclanDublin]

Not sure that UK multinationals (and their shareprice) will be totally immune to a 'chilling effect' of Brexit, given the likely impact it may have going forward or companies trading into the Europe. Indeed, it is precisely to protect the UK economy and give stability that the UK agreed an 18 month (?) grace period after they offically leave the EU. In any event, personally I would excercise caution in UK investments and look at them more thoroughly. I would also be concerned on the impact on STG value given some of the dire forecasts given to the UK gov.t and leaked this week to the press. As an aside, personally I've started looking at shares around the Eurozone, (particularly in Germany/Austria/France/Holland) and there are some interesting prospects there, without the FX risks.