Considering investing in CHN as a dividend stock
CHN is a Closed-End Fund. CHN actually pays out three types of distributions: In the case of CHN, they appear to be paying yearly.  The most recent dividend, with exdate of 18 Dec 2014, consisted of $3.4669 of Long-term capital gains and $0.2982 cash dividend. Prior to that, the dividend with exdate of 19 Dec 2013 consisted of $2.8753 long-term capital gains and $0.4387 cash dividend. For a standard dividend yield you typically would not expect short-term and long-term capital events to be included in a yield calculation, as these events really only occur in relation to a fund rebalancing (changing its investments) and are not really due to the actual performance of the fund in any way.  Most free sites that provide dividend information do not make a distinction on the dividend type. Data source: Premium Data Full Disclosure: I am a co-owner of Premium Data/Norgate. The yield on Div Data is showing 20% ((3.77/Current Price)*100)) because that only accounts for last years dividend. If you look at the left column, the 52 week dividend yield is the same as google(1.6%). This is calculated taking an average of n number of years. The data is slightly off as one of those sites would have used an extra year.
"If you sell a stock, with no distributions, then your gain is taxable under §1001.  But not all realized gains will be recognized as taxable.  And some gains which are arguably not realized, will be recognized as taxable. The stock is usually a capital asset for investors, who will generate capital gains under §1(h), but dealers, traders, and hedgers will get different treatment.  If you are an investor, and you held the stock for a year or more, then you can get the beneficial capital gain rates (e.g. 20% instead of 39.6%).  If the asset was held short-term, less than a year, then your tax will generally be calculated at the higher ordinary income rates.  There is also the problem of the net investment tax under §1411.  I am eliding many exceptions, qualifications, and permutations of these rules. If you receive a §316 dividend from a stock, then that is §61 income.  Qualified dividends are ordinary income but will generally be taxed at capital gains rates under §1(h)(11).  Distributions in redemption of your stock are usually treated as sales of stock.  Non-dividend distributions (that are not redemptions) will reduce your basis in the stock to zero (no tax due) and past zero will be treated as gain from a sale. If you exchange stock in a tax-free reorganization (i.e. contribute your company stock in exchange for an acquirer's stock), you have what would normally be considered a realized gain on the exchange, but the differential will not be recognized, if done correctly. If you hold your shares and never sell them, but you engage in other dealings (short sales, options, collars, wash sales, etc.) that impact those shares, then you can sometimes be deemed to have recognized gain on shares that were never sold or exchanged. A more fundamental principle of income tax design is that not all realized gains will be recognized.  IRC §1001(c) says that all realized gains are recognized, except as otherwise provided; that ""otherwise"" is substantial and far-ranging." Check out the questions about why stock prices are what they are. In a nutshell, a stock's value is based on the future prospects of the company. Generally speaking, if a growth company is paying a dividend, that payment is going to negatively affect the growth of the business. The smart move is to re-invest that capital and make more money. As a shareholder, you are compensated by a rising stock price. When a stock isn't growing quickly, a dividend is a better way for a stockholder to realize value. If a gas and electric company makes a billion dollars, investing that money back into the company is not going to yield a large return. And since those types of companies don't really grow too much, the stocks typically trade in a range and don't see the type of appreciation that a growth stock will. So it makes sense to pay out the dividend to the shareholders. "The Dividend Discount Model is based on the concept that the present value of a stock is the sum of all future dividends, discounted back to the present. Since you said: dividends are expected to grow at a constant rate in perpetuity ... the Gordon Growth Model is a simple variant of the DDM, tailored for a firm in ""steady state"" mode, with dividends growing at a rate that can be sustained forever. Consider McCormick (MKC), who's last dividend was 31 cents, or $1.24 annualized. The dividend has been growing just a little over 7% annually. Let's use a discount, or hurdle rate of 10%. MKC closed today at $50.32, for what it's worth. The model is extremely sensitive to inputs. As g approaches r, the stock price rises to infinity. If g > r, stock goes negative. Be conservative with 'g' -- it must be sustainable forever.  The next step up in complexity is the two-stage DDM, where the company is expected to grow at a higher, unsustainable rate in the early years (stage 1), and then settling down to the terminal rate for stage 2. Stage 1 is the present value of dividends during the high growth period. Stage 2 is the Gordon Model, starting at the end of stage 1, and discounting back to the present. Consider Abbott Labs (ABT). The current annual dividend is $1.92, the current dividend growth rate is 12%, and let's say that continues for ten years (n), after which point the growth rate is 5% in perpetuity. Again, the discount rate is 10%. Stage 1 is calculated as follows: Stage 2 is GGM, using not today's dividend, but the 11th year's dividend, since stage 1 covered the first ten years. 'gn' is the terminal growth, 5% in our case. then... The value of the stock today is 21.22 + 51.50 = 72.72 ABT closed today at $56.72, for what it's worth." "Dividends are one way to discriminate between companies to invest in. In the best of all worlds, your investment criteria is simple: ""invest in whatever makes me the most money on the timeline I want to have it.""  If you just follow that one golden rule, your future financial needs will be taken care of! Oh... you're not 100% proof positive certain which investment is best for you?  Good.  You're mortal.  None of us magically know the best investment for us.  We wing it, based on what information we can glean.  For instance, we know that bonds tend to be ""safer"" than stocks, but with a lower return, so if something calls itself a bond, we treat it differently than we treat a stock. So what sorts of information do we have?  Well, think of the stock market linguistically.  A dividend is one way for a company to communicate with their stockholders in the best way possible: their pocketbooks.  There's some generally agreed upon behaviors dividends have (such as they don't go down without some good reason for it, like a global recession or a plan to acquire another company that is well-accepted by the stockholders).  If a company starts to talk in this language, people expect them to behave a certain way.  If they don't, the stock gets blacklisted fast.  A dividend itself isn't a big deal, but a dividend which isn't shunned by a lot of smart investors... that can be a big deal. A dividend is a ""promise"" (which can be broken, of course) to cash out some of the company's profits to its shareholders.  Its probably one of the older tools out there (""you give investors a share of the profits"" is pretty tried and true).  It worked for many types of companies.  If you see a dividend, especially one which has been reliable for many years, you can presume something about the type of company they are. Other companies find dividend is a poor tool to accomplish their goals.  That doesn't mean they're better or worse, simply different.  They're approaching the problem differently.  Is that kind of different the kind you want in your books?  Maybe.  Companies which aren't choosing to commit a portion of their profits to shareholders are typically playing a more aggressive game.  Are you comfortable that you can keep up with how they're using your money and make sure its in your interests?  It can be harder in these companies where you simply hold a piece of paper and never get anything from them again." Join me for a look at the Quote for SPY.  A yield of 1.82%. So over a year's time, your $100K investment will give you $1820 in dividends.  The Top 10 holdings show that Apple is now 3% of the S&P. With a current dividend of 2.3%. Every stock in the S&P has its own different dividend. (Although the zeros are all the same. Not every stock has a dividend.) The aggregate gets you to the 1.82% current dividend. Dividends are accumulated and paid out quarterly, regardless of which months the individual stocks pay. I agree with the other posters that you will need to seek the advice of a tax attorney specializing in corporate taxation. Here is an idea to investigate: Could you sell the company, and thereby turn the profits that are taxed as ordinary income into a long-term capital gain (taxed at 15%, plus state income tax, if any)? You can determine the value of a profitable business using discounted cash flow analysis, even if you expect that the revenue stream will dry up due to product obsolescence or expiry of licensing agreements.  To avoid the capital gains taxes (especially if you live in a high-tax state like California), you could also transfer the stock to a Charitable Remainder Trust. The CRT then sells the shares to the third-party acquirer, invests the proceeds and pays you annual distributions (similar to an annuity). The flip side of a sale is that now the acquiring party will be stuck with the taxes payable on your company's profits (while being forced to amortize the purchase price over multiple years -- 15, if I recall correctly), which will factor into the valuation. However, it is likely that the acquirer has better ways to mitigate the tax impact (e.g. the acquirer is a company currently operating at a loss, and therefore can cancel out the tax liabilities from your company's profits).  One final caveat: Don't let the tax tail wag the business dog. In other words, focus your energies on extracting the maximum value from your company, rather than trying to find convoluted tax saving strategies. You might find that making an extra dollar in profits is easier than saving fifty cents in taxes. Yep, there just is no free lunch.  So called high dividend stocks are usually from companies that have stable cash flows but relatively little or moderate growth potential. Utility companies come to mind, let's take telecommunications as an example.  Such stocks, usually, indeed are considered more conservative. In a bull market, they won't make high jumps, and in a bear market they shouldn't experience deep falls. I mean, just because the stock market fell by 10%, you're not going to stop using your phone. The stock might suffer a bit but the divided is still yielding you the same. However, fundamental data can have a significant impact. Let's say a recession hits the country of the telco. People might not get the newest iPhone and lock in to an expensive contract anymore, they might use cheaper forms of communication, they might stop paying bills, go bankrupt etc. This will have a severe impact on the company's cash flow and thus hit the stock in a double whammy: One, the dividend is gone. Two, the price will fall even further.  There are basically two scenarios after that. Either the recession is temporary and your stock became a regular growth stock that at some point might bounce back and re-establish at the previous levels. Or the economy has contracted permanently but regained stability in which case you will again have a stock with a high dividend yield but based on a lower price. In conclusion: High dividend stocks make sense in a portfolio. But never consider their income to be safe. Reduce your risk by diversifying. In the United States investing towards donation is a great idea because you can donate appreciated securities directly rather than donating cash.  Notice how much this can benefit you: So you get to both (a) donate untaxed money and then (b) deduct that unrealized money from your income total on your tax return. With the above in mind, a good strategy for investing towards this type of donation would be to pick securities that are likely to increase in market value but not likely to produce any other sort of income.  So bonds (which produce lots of interest income), or stocks with dividends, or equity mutual funds (which distribute dividends as capital gains) would all be suboptimal for this purpose. Of course, an even better strategy would be to establish a widely diversified investment portfolio without thought to future donations.  Then, once a year (or whenever), evaluate all your investments and find some where the market value has increased.  Then donate some of those shares.  No special advance planning necessary. Note that your tax consequences could be more complicated depending on your exact situation.  Read the section about Capital Gain Property in IRS Pub. 26 for all the details.  There may be special limits on the amount you can deduct.  Also, donations of short term capital gains are treated much less favorably, so make sure you donate only long term capital gain property.