Q&A

What does ex-dividend mean? I noticed in a recent Irish Times that Kingspan had gone ex- dividend.

Ex-dividend

Does this mean that it no longer pays interim and final dividends to its shareholders and that the only way to make money is to sell an appreciating share?

Under what circumstances are other firms likely to follow suit?

Mr P.D., Dublin

Things aren't quite as drastic as you fear. As you infer, there are two ways in which investors in equities make money from the exercise.

First, they can gain (or lose) as the share price rises or falls. Additionally, they can make money as the company pays out an annual or bi-annual dividend, or cash payment, to shareholders.

The latter is important to those shareholders who rely on their shares to augment their income.

When a share goes ex-dividend, it means that anyone buying those shares will not receive the upcoming dividend. The dividend due is paid to the person selling the share in the period.

Naturally, such a move makes investment in the share less attractive in the short term so there is often a slight fall in the price of a stock when it goes ex-dividend.

The length of time a share is ex-dividend depends on the length of time between a company announcing its results and the date it sets for the payment of any dividend.

When the results are announced, the stock exchange will trigger the ex-dividend in relation to the next record date - the date by which the company must close the books.

This will be a Friday and the ex-dividend date will be the Wednesday prior to the record date.

As companies generally pay dividends twice a year - unless they are going through a very poor patch or are companies in the growth stage during which all profits are reinvested in the company rather than paid out to shareholders - there are usually two ex-dividend periods for a listed stock.

Personal loans

I will be needing a personal loan of somewhere between €3,000 and 6,000 and I was wondering if you could suggest the best way to go about it or the best financier to approach?

Would I have the best chance with my own bank, and would it give me a decent rate as one of its customers? Would I even get a look-in at another institution if I found a better rate elsewhere?

I also have a joint mortgage. Would it be better to ask my mortgage provider for the loan?

I am self-employed. I expect that would have a bearing on any bank's attitude towards me.

Ms C.M., e-mail

There are several options open to you, depending on your situation but it is best to clear up some misconceptions at the outset.

First, the fact that you are a customer of a particular bank will in no way guarantee you a better rate at that institution than any other.

Second, in today's more competitive world, you will certainly get a look-in elsewhere, even if you might have to dodge some strong-arming on giving them other business.

Essentially you can go to your own bank and/or mortgage provider, you can go to your credit union if you are a member and you can go to other financial institutions, including phone banks.

The best advice I can give you is:

shop around for the best rate - this really should only take an hour or so;

do not take out the loan for any longer than you need to but do not have unrealistic expectations in repaying it - you do not want to have to approach your bank or anyone else should you run into trouble making repayments;

be aware that any lender will probably run a credit check on you.

The fact that you are self-employed will not, in itself, have any affect on the outcome of any loan application. A lender will only be concerned about your ability to pay.

Equity release

Given the amount of publicity surrounding the various equity-release schemes, I investigated the available options open to my parents. I was unhappy with the results as I felt that each came at too high a price.

My question is what would prevent me from "purchasing" 20 per cent of my parents' home at fair market value and adding it to my own mortgage?

Would the asset appreciation over time (say 15 years) not at least equal the interest on a loan of say 80,000?

What would be the personal implications for me regarding tax both now and in the future, regarding inheritance tax, CGT etc?

Mr N.K., email

As you say, there is not much to attract in equity-release schemes and I would not be recommending them except as a last resort to people who need to release value from their property to augment their income in retirement.

As you have discovered, the price offered under any of these schemes amounts to half the market value of the property or less and all the actuarial cards appear to be stacked on the equity-release group's favour.

Your idea is perfectly feasible if you can persuade your lender that it does not overextend you. The idea of shared ownership is not as strange in Irish circles as it once was, although the lender will want to be sure that its money is secure.

Assuming you have some equity in your own property and/or spare repayment capacity, there should be no problem, although you may well have to take out a separate mortgage to cover the purchase of a portion of your parents' property.

What should you look out for? In the first place, you need to ensure that it creates no ill-feeling with other family members - either your parents or siblings. There is nothing as bitter as an Irish inheritance battle and there is no point storing up problems for yourself. If there are other family members, you should discuss your plan with them and make sure all are happy with the idea.

On the tax front, your purchase will be an investment and will be subject to capital gains tax upon any subsequent disposal.

As long as this is a clear purchase, rather than a gift, inheritance tax, or capital acquisitions tax as it is more properly known, should not be an issue on the 20 per cent you are thinking of buying.

However, the inheritance tax regime would kick in on the balance, although your tax-free threshold on this is generous - currently €422,148 parent to child.

Will the capital growth in property match the interest on your loan? That I cannot tell you. On performance of the recent past, it certainly would but there are no guarantees.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, D'Olier Street, Dublin 2 or e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.