I need to look at this more, but don’t dividends mostly return real current earnings where share buybacks are moving your return to future earnings which may never exist?
Also, many people are harmed by this tax treatment because a couple making 80k a year pay no tax on the dividend capital gains?
I am just saying dividends v share buybacks are not the same and have other effects.
Yeah. They're different. Dividends give you cash on the barrel each quarter that is very sticky about heading in a downward direction--but tax treatment is pretty much like ordinary income in most cases.
Stock buybacks may drive stock prices upwards in an unpredictable way that may lead to being able to sell appreciated stock in a tax-advantaged way a couple years out.
Theoretically, it's all the same after tax effects but we don't live in that theoretical world.
For the 2020 tax year, you pay 0% on long-term capital gains if you have total income of $40,000 or less; 15% if you have income of $441,450 or less; and 20% if your income is greater than $441,450.
Interesting, I never paid attention to that. I would guess the number of singles/couples earning $40k/$80k total per year or less and own enough stock to get material dividend income must be miniscule.
Lots of retired affluent people fall into that category. A $4M portfolio would throw off $80K in annual dividends assuming an average 2% dividend rate.
