RE:RE:Dividends2For Canadian investors, (in Alberta), here are your 2022 tax rates. You must lookup your own provincial jurisdiction rates on the CCRA site.
For those with higher income, eligible dividend income is taxed at a much higher rate than income from capital gains.
Unlike the tax implications of dividends being paid to you regularly throughout the year and adding to your yearly taxable income, you can defer your capital gains taxes to later years by holding on to your shares, and selling them in a year when your tax situation may be more favorable to crystalize a disposition. You can then even buy them back the next minute to continue your long term hold.
For tax purposes, the ability to manage your capital gains income year to year is similar to the benefit of the purchase and sale of RRSPs to level out your income levels, based on your personal historical and projected future income. Proper capital gains management is a far more powerful tool, as it does not have the ceiling limitations as there is with your RRSP.
For me, due to significant capital gains I have already realized in the recovery (so far) of our Canadian energy these last couple of years, I do not want any more income now to add to a 7 figure tax exposure. I am not happy that I will soon be forced to liquidate twice to 3 times the amount of my tax bill in oil stocks I currently hold under margin, in order to pay my forthcoming 2022 tax bill, and the calculated hefty installments that will be due in advance for the following years.
In my tax case, I clearly prefer share buybacks and debt repayment over dividends, allowing the deferral of tax liabilities, while keeping that money invested and growing as the sector rerates higher to reach normal P/E levels along with further oil price stability, fundamentals, TMX, demand, and global reduced supply.
Even with MEG at $21, with such low relative historical ratios by any metric, it makes sense to repurchase as many shares at these levels while they can now, their biggest bang for the buck. At present, prices will waffle for a while yet until energy regains it's footing, and that is just fine for now. It is the long game you are playing, as the US chews through it's last remaining 68 Billion bbl of proven reserves at a huge rate of 16 M bpd, an unsustainable rate by all measures, only 11.5 years left of supply. No wonder they are in such a panic to transition.
It is likely that MEG will be eventually bought out. With the foresight to maximize share buybacks instead of issuing dividends, I will net the highest amount of cash as there are fewer shares left outstanding to distribute the proceeds, which is cut by at least 10% a year with a standard NCIB, let alone any additional SCIB forthcoming as we are now within the 50% level of income returned to shareholders, soon to be 100%. It will also ultimately be the most tax efficient income possible, in that scenario, which will then be realized as a lump sum capital gain in that year.
The new federal 2% stock buyback tax introduced by the libtards does not take effect until 2024, underscoring the need for the continued emphasis on buybacks now. I hope MEG takes advantage of this opportunity to maximize tax efficiency and continues to repurchase and cancel the largest amount of shares possible during this final period that Sockboy's hands are on the outside of the cookie jar.
MEG's current financial plan is so far perfectly aligned for me in this regard, and management has proven to be executing it quite well.
ratsnake220 wrote: i really disagree ...in a growth stock you want total debt reduction and a improved cash flow for a re rating of the stock.....buy backs are better than a divident....their will be a time when the mulitple matters......This is not the type of investor who wants a dividend over capital gain....