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Nice site! I agree, this information is generally pretty hard to find. I hate that dividends have such disadvantageous tax treatment in America because I think
by habosa 3y ago
Nice site! I agree, this information is generally pretty hard to find.
I hate that dividends have such disadvantageous tax treatment in America because I think dividends are the healthiest relationship between companies and investors. They try to make money and then give you some of it. As long as the dividend amount is healthy for both the investors and the company your interests are aligned.
Stock buybacks are such shenanigans in comparison: they make money and use it to inflate the value of their shares. Often they do this to hit certain price targets that help with executive compensation (or just image). And in order to actually get your profit you have to sell, which means you’re no longer an investor.
- mystertea 3y agoThanks! I agree that conventional stocks can be a hassle to manage, and intuitively like an income-based approach.
- ravenstine 3y agoThat's not all! Companies are allowed to use debt to buy back their stocks.
- lacrimacida 3y agoNobody is questioning the fact that they’re allowed or not, it’s an unhealthy practice
- ravenstine 3y agoI assumed that was implicit in my reply.
- manmal 3y agoI don’t think dividends are a great incentive as they encourage short term wins over long term thinking.
- flakeoil 3y ago"And in order to actually get your profit you have to sell, which means you’re no longer an investor." But that is basically because the company bought some shares for you. So if you sell to create your own kind of dividend makes no difference (other than maybe how taxes are handled and psychological).
- lxgr 3y ago> Stock buybacks are such shenanigans in comparison: they make money and use it to inflate the value of their shares. Nothing is inflated if you think it through, since the market capitalization does not change. By that logic, is issuing new stock (or even stock splits!) virtuous, since they both decrease the price per share?
- ac29 3y ago> I hate that dividends have such disadvantageous tax treatment in America What do you mean by this? Qualified dividends are taxed at long term capital gains rates, which is an enormous advantage compared to nearly all other forms of income.
- memling 3y agoDividends are taxed twice: once as profit to the company issuing the dividend and once when the recipient receives it.
- venusenvy47 3y agoIsn't this the normal cycle of money? Continuing the example, the recipient spends some of this dividend money at Starbucks and pays sales tax. Then Starbucks pays income tax on the money and the cycle repeats.
- s1artibartfast 3y agoYes, money keeps being taxed but the number of tax events changes depending on the path the money travels. It can have more or fewer taxable events.