I do love a well reasoned argument. David Loeper, once again, gives us a well reasoned argument to think about.
Something I think about when considering stock dividends… If your personal tax rate is higher, you will ask companies not to issue dividends. Why? Many individuals wish to have control over when they pays taxes.
Let’s say you own a company. You are considering a dividend to your stock holders. If you, as the company, issue the dividend to each stock holder, each stock holder will pay taxes on the dividend that year.
Another strategy your company can consider is to buy back shares of your company stock. With less stock on the market, the hope is the stock price will rise. If so, each stockholder has the option to sell part of their holdings and pay taxes. Only those that choose to sell, will pay taxes that year. Some will choose not to sell and will delay paying taxes.
David issues some warnings and things to consider. I recommend reading his thoughts and making up your own mind.