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Return of Capital Dividend Stocks


Mephistopheles
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Let's say I want to generate income in my portfolio without paying dividend or income tax. How would one go about finding or browsing through companies that pay out "return of capital" dividends for which your cost basis goes down but you owe no tax on the income? I own some APTS and CLPR, also WMB which all are such.

 

I was initially under the impression that this is only a feature of MLPs but I guess not. Would love to hear your thoughts on the subject.

 

Context: I just signed a lease to move to NYC next week, so taxes have now become my immediate concern

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I assumed this was just an MLP thing.  I checked with WMB and KMI and they both appear to qualify.  On Kinder Morgan's website they say this:

 

"A corporation’s quarterly distribution of cash is characterized as a taxable dividend (qualified dividend) to the extent it comes out of the corporation’s earnings and profits (“E&P”). Any part of the distribution that exceeds E&P is treated as a non-taxable return of capital (non-dividend distribution) which reduces the shareholder’s basis in the stock. If the return of capital exceeds the stock basis, the excess is treated as a capital gain."

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4 hours ago, Mephistopheles said:

Let's say I want to generate income in my portfolio without paying dividend or income tax. How would one go about finding or browsing through companies that pay out "return of capital" dividends for which your cost basis goes down but you owe no tax on the income? I own some APTS and CLPR, also WMB which all are such.

 

I was initially under the impression that this is only a feature of MLPs but I guess not. Would love to hear your thoughts on the subject.

 

Context: I just signed a lease to move to NYC next week, so taxes have now become my immediate concern

 

APTS pays out lots of taxable income but it all goes to the preferred stock that people seem to hate so much.  The common then gets additional capital gains in return.

 

APTS then appears to issue shares and pay out the cash proceeds out as a non-taxable dividend.

 

So I presume if you screen for stocks with a lot of preferred in the capital structure you may then find more companies doing this.

 

 

Edited by ERICOPOLY
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