Corporations with the capacity to distribute dividends should consider making a distribution in 2012 before the: (a) Medicare tax kicks in and (b) tax rate potentially increases from 15% to 39.6%.
Perversely, to distribute those dividends both companies have routinely had to draw even more cash from the government.
Distribute capital means pay dividends or repurchase their own stock, as opposed to distribute capital to executives as bonuses, which accidentally has been left out.
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Most closed ends distribute varying amounts of dividends and capital gains.
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With the same rate on both forms of income, the tax code doesn't bias corporate decisions on whether to retain and reinvest profits (and allow the earnings to be capitalized into the stock price), or distribute the money as dividends at the time they are earned.
Now investors like David Einhorn would very much like Apple to distribute that cash to shareholders as dividends.
Along with the company's board of directors, he's rejected a plan pushed by private equity firm Pershing Square Capital to sell off some company-owned restaurants and distribute the proceeds to stockholders through dividends and share buybacks.
But the new 15% rate for dividends provides a tempting opening to distribute some earnings.
As a REIT, AMT, a wireless and broadcast communications infrastructure company, will be able to minimize its taxes on its real estate assets, as well as distribute 90% of its income to investors as dividends.
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Lehmann has also historically been a big proponent of Canadian Royalty Trusts predominantly oil, gas and mining companies that distribute a high percentage of profits to shareholders in the form of dividends.
Because they distribute most of their income and capital gains in the form of dividends during the good times, they are unable to pay down debt or build up cash reserves prior to the inevitable downturns.
REITs no longer have to have a completely separate company to manage their non-real estate business operations, but can now own 100% of a TRS. And while REITs must distribute at least 90 percent of their income in the form of dividends, the dividends do not have to be paid entirely in cash but can be distributed as a combination of cash and stock.
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They also must distribute at least 90 percent of their income to shareholders in the form of dividends.
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REITs hold a special place in the hearts of dividend investors, because they must distribute at least 90% of their taxable income each year to shareholders as dividends.
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Many believe capital deployment should follow a "pecking-order theory" that prescribes that managements should apply their cash flow, in order of priority, to fix their balance sheet if overleveraged, fund organic investments, pay dividends, fund acquisitive growth and, only when there is additional cash left over, to distribute it via share repurchases.
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