Capital Dividend

A dividend that comes from what an investor has paid into a publicly-traded company, rather than from its earnings. That is, a capital dividend occurs when a company gives back what the investor has invested. It may occur when a company must pay a required dividend but earnings make it unable to do so from its profits. Capital dividends may be a sign that a company is not financially healthy. In any case, they reduce the amount of capital that the company has to invest in its operations. They are also called return of capital.

Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

capital dividend

A dividend considered to be drawn from paid-in capital rather than from current earnings or retained earnings. Capital dividends are generally not taxable to a stockholder when paid; rather, they are used to adjust the basis of the security downward such that a larger capital gain or a smaller capital loss will result at the time the security is sold. A capital dividend is somewhat akin to tearing boards off a house to use as firewood. If the process goes on too long, the house itself will be gone. Also called return of capital.

Wall Street Words: An A to Z Guide to Investment Terms for Todays Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

References in periodicals archive ?

This additional capital distribution will allow CFFN to pay the True Blue Capital dividend of USD0.25 per share.

The Associations current capital ratios reflect $210 million of dividends that the Association paid to the Company, its sole shareholder, during the quarter ended December 31, 2015, consisting of a $150 million return of capital dividend (reflecting funds that the Company had previously contributed to the Association in 2010) and an additional $60 million dividend.

Achieves inclusive growth with a measurable social capital dividend and significantly lower inequality

One benefit of company-owned life insurance is that the proceeds increase the companys capital dividend account, which can be paid to shareholders as tax-free capital dividends.

We are confident in our double-digit EPS growth expectations for 2012 and are raising our operating cash expectations to $17-19 billion based upon the restart of the GE Capital dividend, said GE chairman and CEO Jeff Immelt.

The company has telegraphed its intentions to reinstate the GE Capital dividend to the parent company in 2012, a goal that we think is attainable.

Equity Cash Net Capital Dividend Income 2011 * $7,954 $450 $459 2010 $7,945 $900 $910 2009 $7,935 $750 $1,111 2008 $7,574 $850 $1571 2007 $6,853 $2,850 $1,856 2006 $7,847 $100 $1,758 2005 $6,189 $400 $1,278 2004 $5,311 $0 $1,007 2003 $4,304 $198 $472 2002 $4,030 $449 $371 2001 $4,108 $382 $604 Total $7,329 $11,397 * June 30.

Any dividend paid on or after 1 July 2009 to a UK company, if it is not a capital dividend, is exempt from UK corporation tax if it falls into one of the five exempt classes as set out in the legislation.

The non-taxable portion of the capital losses and the $50,000 non-taxable portion of the capital gain would be included in the companys capital dividend account.

One benefit of company-owned i lite insurance is that the proceeds increase the companys capital dividend account, which can be paid to shareholders as tax-free capital dividends.

However, and here is where the importance of planning can be seen, the non-taxable surplus portion of the capital gain will be credited to the capital dividend account (CDA) of the (private) corporation (1) and can then be distributed, tax-free, as a dividend to its shareholders.

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