The forecast dividend for their year to 30 September 2018 is 72 eurocents, currently worth 63.0p. So on a share price of 1,513p the gross forward yield, before German tax, is 4.2%. It then depends how you hold the shares.
If in an ISA the tax is not recoverable so you are left with a net yield after tax of around 3.1% which is a little below the current FTSE100 median.
If held direct, then it is not treated as a UK dividend and different rules apply as a foreign dividend. What happens is that it does not form part of your tax free dividend allowance but becomes taxable income. However credit is given for the withholding tax up to your marginal UK tax rate.
In either holding case, my view at present is that TUI is a Buy because although the yields are lowish, they are just this side of acceptable because the share adds valuable diversification not available in any other company that I’d choose, and also there is some strong dividend growth occurring here. That does not mean I’d call TUI a Buy at any yield, but my opinion for the moment is that it hasn’t dropped low enough at present to make it a Hold. All past selections are reviewed regularly and their status may well change several times over the years as their yields and other circumstances alter.
I’ve always said that I may be willing to accept the very occasional below average yield in a portfolio if I found it sufficiently attractive for other reasons. The dilution effect on total portfolio yield is minimal.
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