| Show BUSINESS STOCK and the STOCK MARKET by J 1 1 Though the deadline for filing tax returns is now past many investors are probably still smarting from the blow and looking for possible ways to reduce payments in the future THERE IS NO denying that Uncle Sam takes a big bite out of cash dividends which are regarded as ordinary in income income income in- in come and are therefore taxable taxable taxable tax tax- able at higher rates For those not dependent on generous cash dividends from common stocks there is a way to keep taxes down and still invest in commons ie i.e. buy the shares of companies com com- panics that pay stock dividends on a regular basis DISTRIBUTION of an annual annual annual an an- nual stock dividend is a policy followed by several leading companies Oftentimes a modest cash payment is also made but the attraction lies in the stock dividend THIS IS because stock dividends are generally not taxed as income Under present present present pres pres- ent tax laws taxation is deferred deferred deferred de de- de- de until the shares are sold at which time the cost price must be adjusted to reflect the stock dividend Moreover the shares received received received re re- re- re qualify for term long-term capital gains treatment if the stock on which the dividend has been received is held over six months THUS TAUS WHEN WIZEN the shares are sold presumably at a profit the maximum tax rate would be percent to reach 35 percent by 1972 Stock dividends are often orten though not always associated with growth companies that retain earnings to finance expansion expansion expansion ex ex- programs to sustain the growth pattern BY PAYING stock dividends rather than making large cash payments a company can employ more capital in productive productive productive pro pro- areas and be in a better better better bet bet- ter position to consider mergers mergers mergers mer mer- gers or build new plants From the investors investor's standPoint standpoint standpoint stand stand- point when frequent stock dividends are arc received one ones one's s holdings in a particular company comp company com com- due can increase rapidly p pany to the compounding factor AS WITH any security itis it itis itis is essential to investigate thoroughly before buying the stock of a company simply because because because be be- cause it p pays a stock dividend One reason for this is a company may suffer reduced earnings forcing omission or reduction of the cash dividend HOWEVER when a company is fundamentally strong stock dividends provide an added incentive especially when the company can earn much more moreon on retained earnings s than the investor can do if he receives receive cash pays a 1 tax on the in come and reinvests the r reo re- e eThe The size of the stock d' d divi of course van varies vanes es from company to company For a all II practical purposes a stock dividend of 25 percent or hi high er is equivalent to a stock stork split |
