capital dividend

(redirected from Capital Dividends)

Capital Dividend

A dividend that comes from what an investor has paid into a publicly-traded company, rather than from its earnings. That is, a capital dividend occurs when a company gives back what the investor has invested. It may occur when a company must pay a required dividend but earnings make it unable to do so from its profits. Capital dividends may be a sign that a company is not financially healthy. In any case, they reduce the amount of capital that the company has to invest in its operations. They are also called return of capital.

capital dividend

A dividend considered to be drawn from paid-in capital rather than from current earnings or retained earnings. Capital dividends are generally not taxable to a stockholder when paid; rather, they are used to adjust the basis of the security downward such that a larger capital gain or a smaller capital loss will result at the time the security is sold. A capital dividend is somewhat akin to tearing boards off a house to use as firewood. If the process goes on too long, the house itself will be gone. Also called return of capital.
References in periodicals archive ?
Only then we could translate our strength of human capital dividends into an effective mode of socio economic development for all round productivity," he said.
One benefit of company-owned i lite insurance is that the proceeds increase the company's capital dividend account, which can be paid to shareholders as tax-free capital dividends.
The total capital dividends generated a surplus of SEK16.
However, Constitution Corporate "has no current plans to curtail or eliminate membership capital dividends," Nealon wrote.
One benefit of company-owned life insurance is that the proceeds increase the company's capital dividend account, which can be paid to shareholders as tax-free capital dividends.
So if the corporation has realized any capital gains (net of realized losses), you should generally cause it to pay out capital dividends as your first choice for extracting funds.
If you allow a capital dividend account to build up in the corporation without paying capital dividends, the account can be reduced or wiped out by future capital losses.

Full browser ?