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woog3150
Member
posted: Dec. 8, 2012 @ 4:00p
I'm wondering how you think you could possibly make money on this? The reason these companies do this is so the huge shareholders, directors, CEOs etc can get a chunk of their holdings in the company returned to them in cash at the lowest tax rate possible.
vickh
Senior Member - 5K
posted: Dec. 8, 2012 @ 4:04p
woog3150 said: I'm wondering how you think you could possibly make money on this? The reason these companies do this is so the huge shareholders, directors, CEOs etc can get a chunk of their holdings in the company returned to them in cash at the lowest tax rate possible.
why is it only huge shareholders, and not the retail investor (buy and hold) or trader?
woog3150
Member
posted: Dec. 8, 2012 @ 4:11p
vickh said: woog3150 said: I'm wondering how you think you could possibly make money on this? The reason these companies do this is so the huge shareholders, directors, CEOs etc can get a chunk of their holdings in the company returned to them in cash at the lowest tax rate possible.
why is it only huge shareholders, and not the retail investor (buy and hold) or trader?
A long-term 'dividend as income' strategy is fine, but in the case of one time special dividends there is no way to 'capture' free money- when a dividend is issued your share in the company drops by the same amount and you end up with a tax bill on the dividend. So, if you take the dividend and sell the shares you purchased, you netted $0 and paid tax on the dividend distribution- i.e. you lost money. As a way of parking your money into a (hopefully) appreciating share of a company long-term while receiving periodic distributions in the form of dividends (which are taxed) as income is fine for retirement or long term investing, but there is no "free money" when the dividend pays out. It seems like that is what you are asking about?
Greatness
Handsome Member
posted: Dec. 8, 2012 @ 4:11p
You do realize any dividend issued, special or otherwise, will be reflected as a realized gain within your account. In addition, the stock price will be adjusted accordingly with the said special dividend.
noelandres
Member
posted: Dec. 8, 2012 @ 11:41p
As woog3150 said, you will end up losing money. There's no free money here dude. Pass along.
xerty
Senior Member - 3K
posted: Dec. 9, 2012 @ 12:55a
Dumb article - most of the dividends dates have already passed, and on top of that they ranked the "biggest dividends" by total dollar amount and not % of share price. Take a look at GYRO paying out $38 as a $100 stock if you want to see a big payout.
I used to say there was obviously no free money in dividends (just tax liabilities), but I've watched and learned a lot and now I'm not so sure. I'd say there's very rarely opportunities around dividends, but never say never.
taxmantoo
Ancient Member
posted: Dec. 9, 2012 @ 6:09a
woog3150 said: A long-term 'dividend as income' strategy is fine, but in the case of one time special dividends there is no way to 'capture' free money- when a dividend is issued your share in the company drops by the same amount and you end up with a tax bill on the dividend.
Two words: Roth IRA.
The question is, can you find something that the dividend will exceed the price drop on ex-dividend date?
Glitch99
Senior Member - 10K
posted: Dec. 9, 2012 @ 9:38a
taxmantoo said: woog3150 said: A long-term 'dividend as income' strategy is fine, but in the case of one time special dividends there is no way to 'capture' free money- when a dividend is issued your share in the company drops by the same amount and you end up with a tax bill on the dividend.
Two words: Roth IRA. In my Roth, I really dont care if I get my return as a dividend now or as capital gains years from now. There's no tax considerations either way.
The benefit is if you have large unrealized capital gains in a taxable account, but want to retain your investment position. The large dividend lets you cash out a chunk of those gains at a lower tax rate today, while still maintaining the same stake in the company. And as long as the dividend payout doesnt affect the company's ability to generate growth going forward, you may get the same return from less capital invested.
There are alot of possibilities, but most of them are only a good bet in hindsight when it's too late to take advantage of.
vickh
Senior Member - 5K
posted: Dec. 9, 2012 @ 11:56a
xerty said: Dumb article - most of the dividends dates have already passed, and on top of that they ranked the "biggest dividends" by total dollar amount and not % of share price. Take a look at GYRO paying out $38 as a $100 stock if you want to see a big payout.
I used to say there was obviously no free money in dividends (just tax liabilities), but I've watched and learned a lot and now I'm not so sure. I'd say there's very rarely opportunities around dividends, but never say never.
Exactly. I'm not suggesting it's easy or a free lunch. Looking for something that's unique this year capital gains hike. Like a strong fundamentals company like Costco borrowing money (at ridiculously cheap rates) and paying out a special dividend. in a Roth IRA...
Best place to look for dividend cut off date? or have most passed already?
szechuanpork
Member
posted: Feb. 3, 2013 @ 4:12p
will a one time special dividend show up in a 1099-Div? do i have to report it to the IRS?
vickh
Senior Member - 5K
posted: Feb. 3, 2013 @ 5:13p
szechuanpork said: will a one time special dividend show up in a 1099-Div? do i have to report it to the IRS?s.
yes. that's the whole point of special dividend 15% rate
awstick
Senior Member
posted: Feb. 3, 2013 @ 6:14p
If a company pays out a dividend of $1 per share then it's market value drops by the same $1. If investors valued it at $10 per share then it would only make sense that the company would be worth $1 less when it's the exact same company with that much less cash.
If it was a $10 stock you paid $10 in cash, then receive $1 back and have a stock worth $9. You didn't gain anything, Roth IRA or not.
Dividend hawks just don't get it. Any dividend paid is subtracted from the value of underlying stock. It just forces you to realize capital gains. Yet folks are still sucked into buying the stock thinking that they are safer than other stocks when they are looking for higher yields than bonds. People are sheep.
The question is where do you get a better return with that money- with the company reinvesting it, or by you reinvesting it yourself into something else? If the company is just reinvesting all the cash in order to not pay dividends and inflate stock price when there are no profitable investments for them to make, that's horrendous.
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