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Whether dividends are tax inefficient or not depends on where you are holding them and/or your taxable income. In a Roth IRA or a traditional IRA there is no difference between receiving a dividend or having the company stock price appreciate and selling later. Also, if your taxable income is below $75k/yr (which is very easy to do for most people in the US) qualified dividends and LTCGs aren't taxed at all, so there is no difference there either. In fact a dividend may be better in many cases (assuming you are consistently staying below the $75k/yr threshold), because each dividend reduces some of the growth of your stock, so if you do decide to sell and take a capital gain it is not as large.
Bottom line, owning a company just because it pays a dividend is a terrible strategy. Owning a great company that also happens to pay a dividend is a much better strategy. A dividend should be a sign the company is to a level of maturity they know they can't compound all of the cash they are generating through continued internal capital appreciation and instead of keeping it on the books, giving management the chance to do something stupid with it, they return it to ownership to do with it as they please, whether that's buy more shares of that company, buy more shares of a company you feel is more attractively priced, or spend the money on a night out.
REITS and stocks are apples and oranges. Dividends mean a completely different thing to REITs.
A lot of investors like REITS because they are required to cough up a large percentage (I don't the exact number, 90%?) of profits in exchange for tax treatment that is different for stocks. That was the appeal when I quit working full-time and wanted to dial in some dividend income. (which worked out pretty well for me)
Is the dividend of gov't bonds taxed the same as stocks or REITS?
yes actually it is . treasury's as an example can be local tax free . also bond funds are not adjusted downward after they pay out their interest since the interest is not counted in the nav .
no , treasury's are always state and local tax free . but the big difference is interest is not included in the nav of bond funds typically so when you get it there is no offsetting drop like a reit or stock .
no , treasury's are always state and local tax free . but the big difference is interest is not included in the nav of bond funds typically so when you get it there is no offsetting drop like a reit or stock .
What type of return can I expect if I invest 200k in in dividend paying portfolio?
There are 3 dividend oriented ETFs in my investment/trading universe (I trade on an intermediate term basis): HDV (3.88%) - DVY (3.38%) and XLU (3.43%). They're less volatile than Biotech ETFs. But that isn't saying much . The prices go up and down - and the dividends can go up and down too. Robyn
You can expect higher taxes with higher dividends and lower share price appreciation.
???
I don't understand what you're trying to say. Robyn
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. The prices go up and down - and the dividends can go up and down too. Robyn
