Canadian TaxesFor NHC's tax calculation in Canada, please read the section in the Annual Information Form to which I referred you. There is a section on page 19. immediately above the section on U.S. Taxes, called "We are subject to Canadian tax laws". It describes how they are taxable in Canada on dividends received from the U.S. subsidiary in their complicated corporate structure. They then get an offsetting tax deduction which nets to zero. It has to do with the Canada-US Tax Treaty. I recall there is more on this issue in the Prospectus for the IPO.
If you are having trouble finding these documents to read the extended descriptions, rather than just my precis, you can get them from Canada's mandatory corporate disclosure site
www.sedar.com, which is the equivalent of EDGAR in the US. (I see you live in the US. Hopefully you have received dividends from other Canadian corporations before and understand your personal tax impact.)
On your dividend issue and the need to be conservative on the payout ratio because of cash availability concerns, I agree with you. But it depends on how much cash they have in the Bank in May 2010. That in turn depends on the settlement results of their claims against Kramer. We don't know that one yet. However, we do know they have about $5million at 9/30/2009. They may collect about $3-4million from the insurance company for A/R they have already written off. Then they have made claims against the $8million in escrow from the IPO. Further, they need to buy out Kramer's 12% ownership of the holding company, which could use about $2million of cash if the valuation on the balance sheet is accepted during the settlement negotiations. In short, there are a lot of moving parts to this cash forecast. It's beyond me to figure out.
Assuming they are not cash-poor next May, I stand by my dividend opinion.