TSX:MIC.PR.A - Post by User
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TimeScapeon Dec 06, 2019 4:24am
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Post# 30427878
RE:RE:Another Special Dividend
RE:RE:Another Special DividendThe special dividends are dividends for tax purposes, not return of capital. Some income trusts and REITs will include a return of capital component in their distributions, and that portion is treated differently, with no dividend tax credit. These specials get the full dividend treatment with dividend tax credit, as long as the stock is not held within a registered account, of course, just like the regular dividends.
The comment you heard about return of capital probably was considering the fact that the total amount of the special dividends is higher than the current year's net income - the company has been paying out a fairly low regular dividend, well below the net earnings, and has built up quite a large cash balance, which is an inefficient use of capital, so the company is returning some of that cash to the investors, but it's not a return of your capital, it's from previous year's net income which had not been paid out to shareholders - hence the tax treatment as dividends.