Largest U.S. common stock dividends paid through June 12, 2024
Who paid the most dividends or distributions in the past year? These firms did.
The math: sum(dividends paid) / average(close price), actual payments divided by average adjusted close price.
The math: sum(dividends paid) / average(close price), actual payments divided by average adjusted close price.
These stocks paid shareholders 7% or more in dividends or distributions in the past year, as a percentage of the average share price. Our model accounts for dividends in calculating the Chicago Quantum Net Score.
The dividend bias mitigation (correcting for dividends paid) is set to: 50.00%. We remove some anomalous stocks in our CQNS analysis, so they will not appear here.
0 CHMI 0.17 Cherry Hill Mortgage Investment Corporation
1 AFCG 0.17 AFC Gamma Inc
2 GNL 0.17 Global Net Lease Inc
3 GES 0.16 Guess Inc.
4 AGNC 0.16 AGNC Investment Corp
5 TPVG 0.16 TriplePoint Venture Growth BDC Corp
6 GAIN 0.16 Gladstone Investment Corporation
7 GSBD 0.16 Goldman Sachs BDC Inc
8 CION 0.16 CION Invt Corp
9 FSK 0.16 FS KKR Capital Corp
10 EARN 0.16 Ellington Credit Co.
11 PNNT 0.15 PennantPark Investment Corporation
12 OXSQ 0.15 Oxford Square Capital Corp
13 EFC 0.15 Ellington Financial Inc
14 DSX 0.15 Diana Shipping Inc
15 TWO 0.15 Two Harbors Investment Corp
16 MFIC 0.15 MidCap Financial Investment Corporation
17 TRIN 0.15 Trinity Capital Inc
18 ARR 0.14 ARMOUR Residential REIT Inc
19 ACRE 0.14 Ares Commercial Real Estate Corp
20 NLY 0.14 Annaly Capital Management Inc
21 ARLP 0.14 Alliance Resource Partners LP
22 MRCC 0.14 Monroe Capital Corp
23 NREF 0.14 NexPoint Real Estate Finance Inc
24 SACH 0.14 Sachem Capital Corp
25 MFA 0.14 MFA Financial Inc
26 DX 0.14 Dynex Capital Inc.
27 AOMR 0.14 Angel Oak Mortgage REIT Inc
28 ARI 0.14 Apollo Commercial Real Estate Finance Inc
29 CATO 0.13 Cato Corp.
30 PSEC 0.13 Prospect Capital Corp
31 TSLX 0.13 Sixth Street Specialty Lending Inc
32 FSCO 0.13 FS Credit Opportunities Corp
33 REFI 0.13 Chicago Atlantic Real Estate Finance Inc
34 TCPC 0.13 BlackRock TCP Capital Corp
35 CRCT 0.13 Cricut Inc
36 CCAP 0.13 Crescent Capital BDC Inc
37 BRSP 0.13 BrightSpire Capital Inc
38 SCM 0.13 Stellus Capital Investment Corp
39 KRP 0.13 Kimbell Royalty Partners LP
40 WHF 0.12 WhiteHorse Finance Inc
41 GBDC 0.12 Golub Capital BDC Inc
42 BBDC 0.12 Barings BDC Inc
43 UNIT 0.12 Uniti Group Inc
44 SAR 0.12 Saratoga Investment Corp
45 OBDC 0.12 Blue Owl Capital Corp
46 LPG 0.12 Dorian LPG Ltd
47 CNQ 0.12 Canadian Natural Resources Ltd.
48 AMBP 0.12 Ardagh Metal Packaging S.A.
49 RC 0.12 Ready Capital Corp
50 NAT 0.12 Nordic American Tankers Ltd
51 PFLT 0.12 PennantPark Floating Rate Capital Ltd
52 OCSL 0.12 Oaktree Specialty Lending Corp
53 BSM 0.12 Black Stone Minerals L.P.
54 RWAY 0.11 Runway Growth Finance Corp
55 DMLP 0.11 Dorchester Minerals LP
56 SFL 0.11 SFL Corporation Ltd
57 MPX 0.11 Marine Products Corp
58 HRZN 0.11 Horizon Technology Finance Corp
59 FRO 0.11 Frontline Plc
60 DHT 0.11 DHT Holdings Inc
61 SIGA 0.11 SIGA Technologies Inc
62 NEP 0.10 NextEra Energy Partners LP
63 CLCO 0.10 Cool Company Ltd
64 RITM 0.10 Rithm Capital Corporation
65 ARCC 0.10 Ares Capital Corp
66 FA 0.10 First Advantage Corp.
67 MKTW 0.10 Marketwise Inc
68 RILY 0.10 B. Riley Financial Inc
69 AJX 0.10 Great Ajax Corp
70 PK 0.10 Park Hotels & Resorts Inc
71 GOOD 0.10 Gladstone Commercial Corp
72 SWI 0.10 SolarWinds Corp
73 CRBG 0.10 Corebridge Financial Inc.
74 OMF 0.09 OneMain Holdings Inc
75 VGR 0.09 Vector Group Ltd
76 OUT 0.09 Outfront Media Inc
77 MAIN 0.09 Main Street Capital Corporation
78 MO 0.09 Altria Group Inc.
79 SLRC 0.09 Solar Capital Ltd
80 MPLX 0.09 MPLX LP
81 ET 0.09 Energy Transfer LP
82 BNS 0.09 Bank Of Nova Scotia
83 GMRE 0.09 Global Medical REIT Inc
84 SBRA 0.09 Sabra Healthcare REIT Inc
85 USAC 0.09 USA Compression Partners LP
86 AY 0.09 Atlantica Sustainable Infrastructure Plc
87 TFSL 0.09 TFS Financial Corporation
88 SBLK 0.09 Star Bulk Carriers Corp
89 NMFC 0.09 New Mountain Finance Corp
90 HIW 0.09 Highwoods Properties Inc.
91 NEEpR 0.09 NextEra Energy Inc
92 AB 0.09 AllianceBernstein Holding Lp
93 VTS 0.09 Vitesse Energy Inc
94 WES 0.09 Western Midstream Partners LP
95 OHI 0.09 Omega Healthcare Investors Inc.
96 DEA 0.09 Easterly Government Properties Inc
97 WLKP 0.09 Westlake Chemical Partners LP
98 OLP 0.09 One Liberty Properties Inc.
99 LADR 0.09 Ladder Capital Corp
100 KNTK 0.09 Kinetik Holdings Inc
101 SPOK 0.09 Spok Holdings Inc
102 BCSF 0.09 Bain Capital Specialty Finance Inc
103 KSS 0.08 Kohl`s Corp.
104 HTGC 0.08 Hercules Capital Inc
105 BCE 0.08 BCE Inc
106 ONL 0.08 Orion Office REIT Inc
107 TU 0.08 Telus Corp.
108 IIPR 0.08 Innovative Industrial Properties Inc
109 CIO 0.08 City Office REIT Inc
110 GOGL 0.08 Golden Ocean Group Limited
111 GLPI 0.08 Gaming and Leisure Properties Inc
112 TRP 0.08 TC ENERGY CORP.
113 BGFV 0.08 Big 5 Sporting Goods Corp
114 SAVE 0.08 Spirit Airlines Inc
115 LEG 0.08 Leggett & Platt Inc.
116 KRO 0.08 Kronos Worldwide Inc.
117 PBA 0.08 Pembina Pipeline Corporation
118 CNA 0.08 CNA Financial Corp.
119 CM 0.08 Canadian Imperial Bank Of Commerce
120 KW 0.08 Kennedy-Wilson Holdings Inc
121 HESM 0.08 Hess Midstream LP
122 STLA 0.08 Stellantis N.V
123 FLNG 0.08 Flex Lng Ltd
124 CGBD 0.08 Carlyle Secured Lending Inc
125 EGBN 0.08 Eagle Bancorp Inc (MD)
126 IIIN 0.08 Insteel Industries Inc.
127 EPR 0.08 EPR Properties
128 SBGI 0.08 Sinclair Inc
129 STR 0.08 Sitio Royalties Corp
130 ENB 0.08 Enbridge Inc
131 CSWC 0.08 Capital Southwest Corp.
132 SLG 0.08 SL Green Realty Corp.
133 BHR 0.08 Braemar Hotels & Resorts Inc
134 EPD 0.08 Enterprise Products Partners L P
135 WU 0.08 Western Union Company
136 PAA 0.08 Plains All American Pipeline LP
137 SPH 0.08 Suburban Propane Partners LP
138 GSL 0.08 Global Ship Lease Inc
139 EPM 0.07 Evolution Petroleum Corporation
140 BNL 0.07 Broadstone Net Lease Inc
141 PAX 0.07 Patria Investments Ltd
142 FLIC 0.07 First Of Long Island Corp.
143 CBRL 0.07 Cracker Barrel Old Country Store Inc
144 FIBK 0.07 First Interstate BancSystem Inc.
145 TSQ 0.07 Townsquare Media Inc
146 GLP 0.07 Global Partners LP
147 NWBI 0.07 Northwest Bancshares Inc
148 VZ 0.07 Verizon Communications Inc
149 INSW 0.07 International Seaways Inc
150 AM 0.07 Antero Midstream Corp
151 BGS 0.07 B&G Foods Inc
152 AHH 0.07 Armada Hoffler Properties Inc
153 LTC 0.07 LTC Properties Inc.
154 COLB 0.07 Columbia Banking System Inc.
155 GRNT 0.07 Granite Ridge Resources Inc
156 T 0.07 AT&T Inc.
157 RMR 0.07 RMR Group Inc (The)
158 GNK 0.07 Genco Shipping & Trading Limited
The dividend bias mitigation (correcting for dividends paid) is set to: 50.00%. We remove some anomalous stocks in our CQNS analysis, so they will not appear here.
0 CHMI 0.17 Cherry Hill Mortgage Investment Corporation
1 AFCG 0.17 AFC Gamma Inc
2 GNL 0.17 Global Net Lease Inc
3 GES 0.16 Guess Inc.
4 AGNC 0.16 AGNC Investment Corp
5 TPVG 0.16 TriplePoint Venture Growth BDC Corp
6 GAIN 0.16 Gladstone Investment Corporation
7 GSBD 0.16 Goldman Sachs BDC Inc
8 CION 0.16 CION Invt Corp
9 FSK 0.16 FS KKR Capital Corp
10 EARN 0.16 Ellington Credit Co.
11 PNNT 0.15 PennantPark Investment Corporation
12 OXSQ 0.15 Oxford Square Capital Corp
13 EFC 0.15 Ellington Financial Inc
14 DSX 0.15 Diana Shipping Inc
15 TWO 0.15 Two Harbors Investment Corp
16 MFIC 0.15 MidCap Financial Investment Corporation
17 TRIN 0.15 Trinity Capital Inc
18 ARR 0.14 ARMOUR Residential REIT Inc
19 ACRE 0.14 Ares Commercial Real Estate Corp
20 NLY 0.14 Annaly Capital Management Inc
21 ARLP 0.14 Alliance Resource Partners LP
22 MRCC 0.14 Monroe Capital Corp
23 NREF 0.14 NexPoint Real Estate Finance Inc
24 SACH 0.14 Sachem Capital Corp
25 MFA 0.14 MFA Financial Inc
26 DX 0.14 Dynex Capital Inc.
27 AOMR 0.14 Angel Oak Mortgage REIT Inc
28 ARI 0.14 Apollo Commercial Real Estate Finance Inc
29 CATO 0.13 Cato Corp.
30 PSEC 0.13 Prospect Capital Corp
31 TSLX 0.13 Sixth Street Specialty Lending Inc
32 FSCO 0.13 FS Credit Opportunities Corp
33 REFI 0.13 Chicago Atlantic Real Estate Finance Inc
34 TCPC 0.13 BlackRock TCP Capital Corp
35 CRCT 0.13 Cricut Inc
36 CCAP 0.13 Crescent Capital BDC Inc
37 BRSP 0.13 BrightSpire Capital Inc
38 SCM 0.13 Stellus Capital Investment Corp
39 KRP 0.13 Kimbell Royalty Partners LP
40 WHF 0.12 WhiteHorse Finance Inc
41 GBDC 0.12 Golub Capital BDC Inc
42 BBDC 0.12 Barings BDC Inc
43 UNIT 0.12 Uniti Group Inc
44 SAR 0.12 Saratoga Investment Corp
45 OBDC 0.12 Blue Owl Capital Corp
46 LPG 0.12 Dorian LPG Ltd
47 CNQ 0.12 Canadian Natural Resources Ltd.
48 AMBP 0.12 Ardagh Metal Packaging S.A.
49 RC 0.12 Ready Capital Corp
50 NAT 0.12 Nordic American Tankers Ltd
51 PFLT 0.12 PennantPark Floating Rate Capital Ltd
52 OCSL 0.12 Oaktree Specialty Lending Corp
53 BSM 0.12 Black Stone Minerals L.P.
54 RWAY 0.11 Runway Growth Finance Corp
55 DMLP 0.11 Dorchester Minerals LP
56 SFL 0.11 SFL Corporation Ltd
57 MPX 0.11 Marine Products Corp
58 HRZN 0.11 Horizon Technology Finance Corp
59 FRO 0.11 Frontline Plc
60 DHT 0.11 DHT Holdings Inc
61 SIGA 0.11 SIGA Technologies Inc
62 NEP 0.10 NextEra Energy Partners LP
63 CLCO 0.10 Cool Company Ltd
64 RITM 0.10 Rithm Capital Corporation
65 ARCC 0.10 Ares Capital Corp
66 FA 0.10 First Advantage Corp.
67 MKTW 0.10 Marketwise Inc
68 RILY 0.10 B. Riley Financial Inc
69 AJX 0.10 Great Ajax Corp
70 PK 0.10 Park Hotels & Resorts Inc
71 GOOD 0.10 Gladstone Commercial Corp
72 SWI 0.10 SolarWinds Corp
73 CRBG 0.10 Corebridge Financial Inc.
74 OMF 0.09 OneMain Holdings Inc
75 VGR 0.09 Vector Group Ltd
76 OUT 0.09 Outfront Media Inc
77 MAIN 0.09 Main Street Capital Corporation
78 MO 0.09 Altria Group Inc.
79 SLRC 0.09 Solar Capital Ltd
80 MPLX 0.09 MPLX LP
81 ET 0.09 Energy Transfer LP
82 BNS 0.09 Bank Of Nova Scotia
83 GMRE 0.09 Global Medical REIT Inc
84 SBRA 0.09 Sabra Healthcare REIT Inc
85 USAC 0.09 USA Compression Partners LP
86 AY 0.09 Atlantica Sustainable Infrastructure Plc
87 TFSL 0.09 TFS Financial Corporation
88 SBLK 0.09 Star Bulk Carriers Corp
89 NMFC 0.09 New Mountain Finance Corp
90 HIW 0.09 Highwoods Properties Inc.
91 NEEpR 0.09 NextEra Energy Inc
92 AB 0.09 AllianceBernstein Holding Lp
93 VTS 0.09 Vitesse Energy Inc
94 WES 0.09 Western Midstream Partners LP
95 OHI 0.09 Omega Healthcare Investors Inc.
96 DEA 0.09 Easterly Government Properties Inc
97 WLKP 0.09 Westlake Chemical Partners LP
98 OLP 0.09 One Liberty Properties Inc.
99 LADR 0.09 Ladder Capital Corp
100 KNTK 0.09 Kinetik Holdings Inc
101 SPOK 0.09 Spok Holdings Inc
102 BCSF 0.09 Bain Capital Specialty Finance Inc
103 KSS 0.08 Kohl`s Corp.
104 HTGC 0.08 Hercules Capital Inc
105 BCE 0.08 BCE Inc
106 ONL 0.08 Orion Office REIT Inc
107 TU 0.08 Telus Corp.
108 IIPR 0.08 Innovative Industrial Properties Inc
109 CIO 0.08 City Office REIT Inc
110 GOGL 0.08 Golden Ocean Group Limited
111 GLPI 0.08 Gaming and Leisure Properties Inc
112 TRP 0.08 TC ENERGY CORP.
113 BGFV 0.08 Big 5 Sporting Goods Corp
114 SAVE 0.08 Spirit Airlines Inc
115 LEG 0.08 Leggett & Platt Inc.
116 KRO 0.08 Kronos Worldwide Inc.
117 PBA 0.08 Pembina Pipeline Corporation
118 CNA 0.08 CNA Financial Corp.
119 CM 0.08 Canadian Imperial Bank Of Commerce
120 KW 0.08 Kennedy-Wilson Holdings Inc
121 HESM 0.08 Hess Midstream LP
122 STLA 0.08 Stellantis N.V
123 FLNG 0.08 Flex Lng Ltd
124 CGBD 0.08 Carlyle Secured Lending Inc
125 EGBN 0.08 Eagle Bancorp Inc (MD)
126 IIIN 0.08 Insteel Industries Inc.
127 EPR 0.08 EPR Properties
128 SBGI 0.08 Sinclair Inc
129 STR 0.08 Sitio Royalties Corp
130 ENB 0.08 Enbridge Inc
131 CSWC 0.08 Capital Southwest Corp.
132 SLG 0.08 SL Green Realty Corp.
133 BHR 0.08 Braemar Hotels & Resorts Inc
134 EPD 0.08 Enterprise Products Partners L P
135 WU 0.08 Western Union Company
136 PAA 0.08 Plains All American Pipeline LP
137 SPH 0.08 Suburban Propane Partners LP
138 GSL 0.08 Global Ship Lease Inc
139 EPM 0.07 Evolution Petroleum Corporation
140 BNL 0.07 Broadstone Net Lease Inc
141 PAX 0.07 Patria Investments Ltd
142 FLIC 0.07 First Of Long Island Corp.
143 CBRL 0.07 Cracker Barrel Old Country Store Inc
144 FIBK 0.07 First Interstate BancSystem Inc.
145 TSQ 0.07 Townsquare Media Inc
146 GLP 0.07 Global Partners LP
147 NWBI 0.07 Northwest Bancshares Inc
148 VZ 0.07 Verizon Communications Inc
149 INSW 0.07 International Seaways Inc
150 AM 0.07 Antero Midstream Corp
151 BGS 0.07 B&G Foods Inc
152 AHH 0.07 Armada Hoffler Properties Inc
153 LTC 0.07 LTC Properties Inc.
154 COLB 0.07 Columbia Banking System Inc.
155 GRNT 0.07 Granite Ridge Resources Inc
156 T 0.07 AT&T Inc.
157 RMR 0.07 RMR Group Inc (The)
158 GNK 0.07 Genco Shipping & Trading Limited
An investor might use this data on historical yields to find companies to research for a value investment.
In the good case scenario, these firms have sustainable and growing distributable cash flow, while the market lowered their stock price. This happens when risk-free interest rates rise, and slow/no growth cash cows are repriced.
In the typical case, these firms are long-term, cash generation businesses like REITs, MLPs, and BDCs and either they had a one-off distribution (one MLP fought a short-seller that way), or a unique windfall (e.g., ocean shippers during the pandemic).
In a bad case scenario, the firms recently lost their cash flow, or spun out their cash generator, and the market is repricing them.
Most of the top names on this list are master limited partnerships or publicly traded investment vehicles such as investment companies, business development corporations, real estate investment trusts and holding companies. A few are operating companies with windfall profits (think pandemic-related supply chain businesses), spin-offs or M&A activity (returning capital to shareholders), companies whose expected fortunes have changed (driving down their share prices) or in one case an investment vehicle that battled a short seller's attack by raising dividends.
Further down the list you find operating companies that traditionally pay a high dividend (think utilities, telecommunications or low-growth cash cows) , who have boosted their dividends further to compete for investment dollars with rising US Treasury Bill rates.
Past dividend yields are not a guarantee of future dividend yields. Do your due diligence and learn their stories before you invest.
Dividend Discussion (our thoughts):
Some stocks pay a consistent dividend that is a sustainable percentage of profits and free cash flow (e.g., 20% to 50%). As the company grows profits and cash flow, it can afford to grow and maintain higher dividend rates. This also works in reverse. When a company becomes less profitable, it feels pressure to shrink or eliminate its dividend. The payment of dividends is somewhat independent of the price of the shares, and so we can occasionally find bargains or mis-priced securities.
There are exceptions to the 'sustainable dividend' story above. Some companies pay a one-time dividend to return cash to shareholders. This could be due to a windfall profit (e.g., winning a lawsuit), or restructuring their business (e.g., sell or spin-out a business).
As risk-free interest rates change, it significantly changes the valuation of stocks with high dividends and slow growth. This is one impact of U.S. Federal Reserve Bank, Federal Open Market Committee decisions, and fixed income markets, as they impact both bond and equity investors. When market interest rates rise, bond and equity market valuations fall, and vice versa.
Some stocks pay a consistent dividend that is a sustainable percentage of profits and free cash flow (e.g., 20% to 50%). As the company grows profits and cash flow, it can afford to grow and maintain higher dividend rates. This also works in reverse. When a company becomes less profitable, it feels pressure to shrink or eliminate its dividend. The payment of dividends is somewhat independent of the price of the shares, and so we can occasionally find bargains or mis-priced securities.
There are exceptions to the 'sustainable dividend' story above. Some companies pay a one-time dividend to return cash to shareholders. This could be due to a windfall profit (e.g., winning a lawsuit), or restructuring their business (e.g., sell or spin-out a business).
As risk-free interest rates change, it significantly changes the valuation of stocks with high dividends and slow growth. This is one impact of U.S. Federal Reserve Bank, Federal Open Market Committee decisions, and fixed income markets, as they impact both bond and equity investors. When market interest rates rise, bond and equity market valuations fall, and vice versa.
Past dividends is not a guarantee of future dividends
You should not assume that a company will continue to pay dividends, nor pay them at the same rate. The decision to pay a dividend, and the amount paid, is based on earnings and availability of suitable investments available to the company. Companies change their dividend policies & dividend amounts frequently.
Money losing companies that pay dividends
You may also notice that a few companies are not profitable, but paid significant dividends over the past year. There are three simple cases that we think about:
1. The company was, but is no longer profitable
2. The company is designed to pay dividends based on operating cash flows (e.g., REITS or MLPs) but have 'non-cash' expenses like depreciation or amortization to cause an accounting loss.
3. The company paid a small dividend percentage, but then the stock price declined.
You should not assume that a company will continue to pay dividends, nor pay them at the same rate. The decision to pay a dividend, and the amount paid, is based on earnings and availability of suitable investments available to the company. Companies change their dividend policies & dividend amounts frequently.
Money losing companies that pay dividends
You may also notice that a few companies are not profitable, but paid significant dividends over the past year. There are three simple cases that we think about:
1. The company was, but is no longer profitable
2. The company is designed to pay dividends based on operating cash flows (e.g., REITS or MLPs) but have 'non-cash' expenses like depreciation or amortization to cause an accounting loss.
3. The company paid a small dividend percentage, but then the stock price declined.
How we calculate dividends
We use a novel method to compare stock dividend payouts. It divides the actual dividends paid by the average closing share price. This is an actual, historical dividend yield for an owner of the stock every day for the past year. This is not a forward-looking dividend yield, which is what you typically see. We use it in our platform.
Dividend payout: (1 + dividend %)
A. 1.15 = 15% payout
B. 1.00 = no dividend
C. 1.012 = 1.2% dividend yield (e.g., stock ABC paid $1.20 last year, and had an average close price of $100)
Do your due diligence, learn their stories, and decide where you will invest. Each of these stocks has a story.
We use a novel method to compare stock dividend payouts. It divides the actual dividends paid by the average closing share price. This is an actual, historical dividend yield for an owner of the stock every day for the past year. This is not a forward-looking dividend yield, which is what you typically see. We use it in our platform.
Dividend payout: (1 + dividend %)
A. 1.15 = 15% payout
B. 1.00 = no dividend
C. 1.012 = 1.2% dividend yield (e.g., stock ABC paid $1.20 last year, and had an average close price of $100)
Do your due diligence, learn their stories, and decide where you will invest. Each of these stocks has a story.
Dividend stocks tend to decline when interest rates rise
We were attracted to a particular dividend stock. It pays a high dividend, generates significant free cash flow, and is a consistent performer. This stock fell almost in lock-step with the rise of interest rates. This is because high dividend stocks can often look like a bond but with equity risk. One current example is Verizon $VZ. The dividends they pay are worth less on a weighted average cost of capital basis (e.g., if you can earn 5.5% in a no-risk US Treasury, the relative value of a 7.5% dividend is lower). Verizon also holds significant amounts of corporate debt, which gets more expensive to renew or roll-over into higher interest rate markets (like we have today).
We were attracted to a particular dividend stock. It pays a high dividend, generates significant free cash flow, and is a consistent performer. This stock fell almost in lock-step with the rise of interest rates. This is because high dividend stocks can often look like a bond but with equity risk. One current example is Verizon $VZ. The dividends they pay are worth less on a weighted average cost of capital basis (e.g., if you can earn 5.5% in a no-risk US Treasury, the relative value of a 7.5% dividend is lower). Verizon also holds significant amounts of corporate debt, which gets more expensive to renew or roll-over into higher interest rate markets (like we have today).
Why invest in dividend-paying stocks?
The simple answer is it reduces your risk. Each year a portion of your investment, or a return on your investment, is paid.
Why avoid dividend-paying stocks?
On the other hand, dividends are taxed twice, once as the company generates the profit to pay them, and twice as you receive the dividend. In most situations, dividends are taxed higher than capital gains, so there is almost a 'triple tax' on dividends.
As an example of double taxation from dividends, a dollar earned by a company yields $0.70 after corporate taxes. They pay the $0.70 to shareholders who then pay Federal and State taxes of 40% on that income, yielding a final amount of $0.42 (out of the original dollar), or a tax of 58%.
Can you avoid double taxation on dividends?
Case 1: Invest in companies that reinvest earnings into growth (e.g., Amazon's strategy) so no tax would be paid and the company is expected to grow future earnings more quickly. In that case, no current tax is paid.
Case 2: Invest in companies that use free cash flow to increase per-share, shareholder equity. In this case, the company earns income, pays corporate taxes of $0.30, and uses the $0.70 (after taxes) to buy back shares of stock or pay down debt. The investor, in theory, could defer their share of taxes indefinitely by not selling their shares, or sells them after a year and pays lower capital gains taxes as low as 15%. In this case, the tax paid in the current year is $0.30 or $0.405 if the stocks were sold after one year.
Case 3: Look into master limited partnerships which pass through to the investor their financial performance and distributions. Their financial performance affects your basis in the stock, and is taxable, which may offset cash distributions at tax time.
The simple answer is it reduces your risk. Each year a portion of your investment, or a return on your investment, is paid.
Why avoid dividend-paying stocks?
On the other hand, dividends are taxed twice, once as the company generates the profit to pay them, and twice as you receive the dividend. In most situations, dividends are taxed higher than capital gains, so there is almost a 'triple tax' on dividends.
As an example of double taxation from dividends, a dollar earned by a company yields $0.70 after corporate taxes. They pay the $0.70 to shareholders who then pay Federal and State taxes of 40% on that income, yielding a final amount of $0.42 (out of the original dollar), or a tax of 58%.
Can you avoid double taxation on dividends?
Case 1: Invest in companies that reinvest earnings into growth (e.g., Amazon's strategy) so no tax would be paid and the company is expected to grow future earnings more quickly. In that case, no current tax is paid.
Case 2: Invest in companies that use free cash flow to increase per-share, shareholder equity. In this case, the company earns income, pays corporate taxes of $0.30, and uses the $0.70 (after taxes) to buy back shares of stock or pay down debt. The investor, in theory, could defer their share of taxes indefinitely by not selling their shares, or sells them after a year and pays lower capital gains taxes as low as 15%. In this case, the tax paid in the current year is $0.30 or $0.405 if the stocks were sold after one year.
Case 3: Look into master limited partnerships which pass through to the investor their financial performance and distributions. Their financial performance affects your basis in the stock, and is taxable, which may offset cash distributions at tax time.