Dividends are taxed like regular income, whereas capital gains (the amount your investment increased when you sell it) get taxed at a fixed lower rate. So selling stocks and making capital gains will result in less tax than if you buy stocks and hold them to make dividends indefinitely.
In the past, dividends were the more common way to r…
Dividends are taxed like regular income, whereas capital gains (the amount your investment increased when you sell it) get taxed at a fixed lower rate. So selling stocks and making capital gains will result in less tax than if you buy stocks and hold them to make dividends indefinitely.
In the past, dividends were the more common way to return proceeds to shareholders, and it's also closer to the natural mechanisms of the the underlying assets, i.e. earning a portion of the cash flow the business is actually generating.
But in a world where capital gains is the tax-advantaged way of actually getting money from your investment, you don't actually get anything unless you constantly buy and sell, (or borrow against the value, which is also common but also does not require long term positive cash flow from the actual underlying business).
All of the above means that playing financial tricks to boost the theoretical value of the stock matters more than simply maximizing positive cashflow
Dividends are taxed like regular income, whereas capital gains (the amount your investment increased when you sell it) get taxed at a fixed lower rate. So selling stocks and making capital gains will result in less tax than if you buy stocks and hold them to make dividends indefinitely.
In the past, dividends were the more common way to return proceeds to shareholders, and it's also closer to the natural mechanisms of the the underlying assets, i.e. earning a portion of the cash flow the business is actually generating.
But in a world where capital gains is the tax-advantaged way of actually getting money from your investment, you don't actually get anything unless you constantly buy and sell, (or borrow against the value, which is also common but also does not require long term positive cash flow from the actual underlying business).
All of the above means that playing financial tricks to boost the theoretical value of the stock matters more than simply maximizing positive cashflow
Ahh okay. Makes perfect sense. Sucks how backwards this financial system is.