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there is also a term called bleeding the pig... where you load up a company with a lot of debt and eventually the company goes bankrupt... guess who doesn't los

there is also a term called bleeding the pig... where you load up a company with a lot of debt and eventually the company goes bankrupt... guess who doesn't lose out though. buybacks are taxed at a capital gains tax rate, whereas dividends are subject to ordinary income tax.

chiefalchemist 7y ago
Are there that many companies bleeding the pig? Possible. But how likely?
throw0101a 7y ago
> ... whereas dividends are subject to ordinary income tax. Not in Canada: > Unlike many other countries, dividends from Canadian based companies are eligible for a somewhat convoluted set of calculations that can fondly be described as the dividend gross up and tax credit system. The basic rationale behind this system is that dividends are paid by corporations after the taxman has already taken his cut. Therefore, if dividend payments were fully taxed in the hands of the investor as well, it would equate to a double taxation. * https://www.fool.ca/13-steps-to-financial-freedom/step-8-the-great-dividend-tax-advantage/ https://www.fool.ca/13-steps-to-financial-freedom/step-8-the... * https://www.investopedia.com/terms/d/dividendtaxcredit.asp https://www.investopedia.com/terms/d/dividendtaxcredit.asp It's slightly convoluted, but if you have investments in taxable accounts, then there's a bit of advantage in them than simply interest. Though capital gains in Canada is only taxed at half of one's marginal rate as well.
- Scoundreller 7y ago
  Right, but this means, for Canadians, dividends paid by non-Canadian corps are taxed as regular income. Stocks to do buybacks instead of dividends are more valuable to us.
akavi 7y ago
In the USA, dividends on stock one has held for more than a year is taxed as long term capital gains. The tax advantage of buybacks is they allow the shareholder to choose when the taxes are incurred, not how they’re taxed.

chiefalchemist 7y ago

Are there that many companies bleeding the pig? Possible. But how likely?

throw0101a 7y ago

> ... whereas dividends are subject to ordinary income tax. Not in Canada: > Unlike many other countries, dividends from Canadian based companies are eligible for a somewhat convoluted set of calculations that can fondly be described as the dividend gross up and tax credit system. The basic rationale behind this system is that dividends are paid by corporations after the taxman has already taken his cut. Therefore, if dividend payments were fully taxed in the hands of the investor as well, it would equate to a double taxation. * https://www.fool.ca/13-steps-to-financial-freedom/step-8-the-great-dividend-tax-advantage/ https://www.fool.ca/13-steps-to-financial-freedom/step-8-the... * https://www.investopedia.com/terms/d/dividendtaxcredit.asp https://www.investopedia.com/terms/d/dividendtaxcredit.asp It's slightly convoluted, but if you have investments in taxable accounts, then there's a bit of advantage in them than simply interest. Though capital gains in Canada is only taxed at half of one's marginal rate as well.

Scoundreller 7y ago
Right, but this means, for Canadians, dividends paid by non-Canadian corps are taxed as regular income. Stocks to do buybacks instead of dividends are more valuable to us.

akavi 7y ago

In the USA, dividends on stock one has held for more than a year is taxed as long term capital gains. The tax advantage of buybacks is they allow the shareholder to choose when the taxes are incurred, not how they’re taxed.