Dividend income June 2015 and Baxter spin-off tax implications

The month is almost over and since there are no further dividends coming in for me this month I’m posting this a couple of days early. I received three dividends in June:

  • Unilever (ULVR): 10.03EUR
  • McDonalds (MCD): 4.96EUR
  • Royal Dutch Shell (RDSB): 30.15EUR

In total that’s 45.14EUR in dividend income this month, bringing this year’s total to 397.44EUR.

In terms of portfolio value this month was all over the place, I still need to update the ‘my portfolio’ page but the ongoing correction and currency fluctuations didn’t have a positive effect 🙂

Next week I will be making my first sell in my dividend portfolio but unfortunately it’s because the government is forcing my hand. As you may know, Baxter is spinning off its biotech division into Baxalta. One of the fiscal problems of living in Belgium is that the government charges a 25% tax on spin-off shares. It’s a pretty silly tax as most small retail investors avoid this tax by selling their shares before the shares are split off.

I don’t have a whole lot of Baxter shares but because the new Baxter and the Baxalta spin-off each represent roughly 50% of the current Baxter this means that if I keep my shares I will need to pay about 12.5% tax. Which would be a tax bill of over 70EUR on a 580EUR investment.  So this means I need to sell my Baxter (BAX) before the closing bell on June 30, 2015.

I’m still undecided about what I’m going to do with the proceeds of this sale but I think I’m going to pool it together with fresh money to invest it into a different firm. Buying both Baxter and Baxalta would still be cheaper in terms of transaction costs and transaction tax than paying the spin-off tax but I feel the that I would be spreading myself a bit too thin by investing such a little amount into two firms. I’m not 100% enthusiastic about the short-term dividend prospects after the spin-off either as it effectively amounts to a dividend cut with Baxter offering a new dividend payout ratio of around 35 percent and Baxalta as little as 15 percent.

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