AHT moved to about $5.45/sh from $4.90/sh... pays over 9% dividend with good FFO. Travel in USA is expected to be more than expected per CEO of Hilton on CNBC. US Government issued warning of travel to Europe due to terrorists. Zika virus in central and south America is an issue. CLNY announced a merger and it is over $18/sh again. Also about 9% dividend. Merger expected to save over $100million in costs. They own SFR residences, commercial buildings, now moving to Asia real estate.
solarUS said: considering BCS today. if no brexit there's a big upside....plus dividend is quite high. If you look at the chart pattern of many financial stocks (C, BAC, JPM, MS, GS, HSBC, etc) they look very similar: ie. all reaching support levels and coming closer to triggering buy signals on various indicators. I'm stalking and will buy FAS (leveraged financial ETF) for a short term holding to take gains quickly.
TAL paid its $0.54/sh special dividend. But stock price has tanked again to about $13. I'm still holding since the dividends keep rolling in. (The regular "dividends" are actually classed as "return of capital" which means I don't pay tax on it.) Shipping on the seas is going to be more efficient with the new Panama Canal... TAL and Triton are merging in anticipation of that.
NoBoB said: chc said: (The regular "dividends" are actually classed as "return of capital" which means I don't pay tax on it.) You don't pay tax on it *yet*. You'll pay them when you sell.
yeah not only that it makes it a little more of a pain as you never know where long term stock gains could be in the future. I had this problem 2 years ago when I liquidated holdings and my basis was at less than 60% of the original purchase price.
But if I'm at a high income tax bracket now, dividends would be taxed at a pretty high level. Return of capital is not taxed at all. If I hold the stock for more than a year (it's been more than a year), then my capital gain is only 20% regardless of my income tax rate.
Is that correct or not? ( I'm not sure.)
$100 stock. Pays $5 dividend per year. Tax rate of 35% fed + !0% state means dividend taxed at 45%. (As of 2013, individuals will have to pay their income tax rate on all dividend income they receive.) Assume stock stays at $100/sh after one year and you sell it, then no capital gain tax. Tax you paid was 45% of the $5 dividend = $2.25 tax.
$100 stock. Pays a return of capital of $5 per year. No tax is paid on the return of capital. Your cost basis is now $95/sh. Assume the stock stays at $100/sh after one year and you sell it. Now you pay long term capital gains rate of 20% for fed. Tax you paid was 20% of $5 capital gain = $1.
If I'm incorrect, someone please correct the above so that we can all understand it better.
That is correct (for you at least). Return of capital lowers your cost basis, so you'll be paying capital gains (short or long depending on holding period), which depending on tax bracket, *could* be as low as 0% (for those with long term gains in the 15% bracket), but it can go all the way up to the highest income bracket for high earners with short gains.
Here is another question about "return of capital". If I receive all of my capital after X years of holding it, then what happens when I get another "return of capital" payment? The company doesn't know what my cost basis is. My cost basis can't be less than zero, can it? If they classify it as return of capital I still don't pay any taxes on it, right?
It is an interesting financial tactic of paying return of capital instead of dividend. I like it. ( I think. )
Does anyone know how we can find stocks that pay "return of capital" instead of dividend... and a hefty payment, like TAL? I
CHC -- for qualified dividends, my understanding is that you will be at a rate lower than your marginal tax rate according to this table from Wikipedia:
Ordinary Income Tax Rate
Ordinary Dividend Tax Rate
Qualified Dividend Tax Rate
So, sure dividends are taxed more than 0%, but taxed at a substantially lower rate than ordinary income.
ETA: The above may not be applicable to your situation... As I read back, I think you are more comparing return of capital taxed at 0% while any taxation of dividends would be at the rates above (or higher for non-qualified dividends) which mathematically is an infinitely higher rate -- even if low compared to ordinary income tax rates.
Oliver -- Yes, I prefer to get my tax advice from Wiki, not from the IRS or a CPA.
I think that table applied prior to 2013. I may be incorrect, but in 2013 the tax for dividend was changed to be at the income tax rate of the investor, not the more favorable table you found. Again, I could be wrong.
If the above is correct, then I'm trying to find other "return of capital" stocks with high "yield" and good EPS. I google search for a "list of stocks paying return of capital"and could not finding anything. Anyone have success?
My understanding is that this has been extended and is still current, but I'm not a tax guy.
What is your objective?
To me, my goal is best long term return net of taxes -- it doesn't matter to me if a make my money with capital gains (say a non-dividend paying growth stock), a high dividend stock or a return of capital investment. So, I focus on:
Trading shorter term purchases in IRAs to avoid short term capital gains (I LOSE the ability to write off losses... that's my choice)
Trying to keep my taxable accounts filled with stable purchases, whether dividend payers or not, to minimize capital gains and reap the reward of lower tax rate qualified dividends and capital gains
Putting non-qualified dividend payers (some REITS, preferreds, etc) in IRAs
Years ago, when interest rates were higher, it made sense to have bonds and CDs in an IRA because they are taxed at ordinary income rates. But with today's rates, the dollar amount of the return doesn't justify occupying space in an IRA in my estimation.
Remember that whether you get your return from capital gains or from dividends (and you are investing for "income"), the dividend payers and the capital gainers are identical -- either hold the dividend payers and reap the income or hold and periodically sell a portion of the capital gainers -- the return is the same.
ETA: You might want to look at MLPs for your return of capital. There is an extra tax form to fill out for those that issue a K1. Not a huge deal, but some don't like the extra hassle.
ETA II: From the IRS website: Qualified Dividends Qualified dividends are the ordinary dividends subject to the same 0%, 15%, or 20% maximum tax rate that applies to net capital gain. They should be shown in box 1b of the Form 1099-DIV you receive.The maximum rate of tax on qualified dividends is:0% on any amount that otherwise would be taxed at a 10% or 15% rate.15% on any amount that otherwise would be taxed at rates greater than 15% but less than 39.6%.20% on any amount that otherwise would be taxed at a 39.6% rate.To qualify for the maximum rate, all of the following requirements must be met.The dividends must have been paid by a U.S. corporation or a qualified foreign corporation. (See Qualified foreign corporation , later.)
Holding period. You must have held the stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date. The ex-dividend date is the first date following the declaration of a dividend on which the buyer of a stock is not entitled to receive the next dividend payment. When counting the number of days you held the stock, include the day you disposed of the stock, but not the day you acquired it. See the examples, below.Exception for preferred stock. In the case of preferred stock, you must have held the stock more than 90 days during the 181-day period that begins 90 days before the ex-dividend date if the dividends are due to periods totaling more than 366 days. If the preferred dividends are due to periods totaling less than 367 days, the holding period in the preceding paragraph applies.
The only stock I know that treats partial amounts of the dividends paid out as a return of capital is B&G Foods (BGS). When i sold in 2014 my shares were low enough my div yield was appx 60% on sone shares.
I was told when you meet a basis of $0 you will then pay gains on each return of cap distribution. My share basis was down to about a $1.50. I think had i kept it another 3 years i would have shares to zero.
chc said: My cost basis can't be less than zero, can it? No, it can't. Once your cost basis reaches zero, you report further return of capital as a capital gain (short/long depending on your holding period). Note that the company paying the distribution may be unaware of your cost basis, and depending on when you acquired the underlying asset, your brokerage may not know either. Keep records.
Good news for Triton and TAL International. The merger is done! New symbol is TRTN. The stock price zoomed back up to $16.75/sh, paying hefty return of capital 0.45 in May, and another apecial dividend of 0.54 in June. They are going to save $$$$ on the merger and should keep great dividends (or return of capital) going... Until they invent the Star Trek transporter, I think shipping by container is going to increase as the economy improves. (Industrial production for June surged to highest level in about a year!)
Got my dividends for AHT and CLNY and respective preferred shares dividends! Thanks to all who recommended these and other dividend stocks. The share prices are moving higher too! My TAL completed merger with Triton and new symbol is TRTN... The dividends kept rolling out and the share price is almost $17 now for nice capital gain... I agree with above posting and still holding to wait for the $$$$ savings of the merger to drop to bottom line.
I'm biased regarding AHT, CLNY, TRTN (that is the new symbol for TAL and Triton merger, not TAL).
All paying incredibly high dividends and at lows of their historical up and down tendencies. All have AFFO (AHT and CLNY) or EPS (TRTN) which can support the great dividends.
BUT.... you have to hold these for over a year. It took over 1-2 years for them to drop from highs to their current level. It is not likely they will zoom upward in short time frame. As someone else has staed, you have to BUY LOW, WAIT, then SELL HIGH. But you get to collect some great dividends while you get out of the house and have a life.
I own lots of dividend stocks paying 4% or higher on my cost basis. LMT, PFE, POT, MOS.
I really like AA (1.3% dividend, which beats most savings accounts) which is spinning off raw production from special fabricated products. Aluminum is big in auto and aircraft, defense. When economy cycle grows again, I'm sure AA will enjoy the ride. AA has positive EPS too. But you have to buy low, WAIT, then sell high. There is a federal decision coming about issuing a tariff to stop aluminum dumping by foreign companies. They issued a tariff to stop steel dumping several months ago that was 235% which caused X (US Steel) jump over 100%.
I also like AHT, CLNY, TRTN because they have been basing after a huge drift downward, all making money, but out of favor. I agree with chc that you just have to look for opportunities like these and just say to yourself: Are these companies going to be around in 1-2 years, can they continue to pay me the dividends with their cash flow, and what is the time frame I am willing to wait for a move up to occur. The good news is they will pay you those dividends while you wait. What a concept.
I'll add NAT to the list of high paying dividends, but not quite enough EPS to completely cover those dividends so be wary. But like TRTN, it is in the transportation of containers on ships, out of favor. I just bought shares today at $13.55/sh on a drop of about $0.43sh today... YET, tomorrow is ex-dividend date paying $0.43/sh. I'm buying in tax deferred account so no taxes on the dividend I will qualify for tomorrow. My indicators show it is in the oversold territory too. I'm not going to hold this for long term. I will sell over $15/sh as it has been cycling between $13 and $16.
Cooz, You made a gain so be happy. If your goal was short term gain, then you accomplished it.
I trade short term in my retirement accounts because there taxes are all deferred.
I trade long term in my regular account in hopes of holding for at least one year to get the favorable long term capital gain tax rate.
It may sound counter intuitive. But I learned that from skilled traders on a subscription blog. Of course, this implies you know how to trade/invest for consistent profits to out perform the general market. Makes no sense to trade short or long term if you are not out performing the general market. Just buy an index ETF in that case.
I'm really liking AA now that China's industrial production has increased again for June. Likewise, USA PMI manufacturing has increased for the 3rd month in a row. The sector of Fabricated Metals is also showing growing PMI which will help AA's Arconic spin off in upcoming quarters EPS.
FWjunkie2 said: vnuts21 said: Is there a good writeup/read somewhere that can introduce me to dividend paying stocks? Fatwallet has a thread with good resources to learn and analyze dividend paying stocks...
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