Embarr Downs, Inc. (EMBR)

[surfkast]

Any thoughts as to why they keep giving out worthless dividends?

integral Member Level Tuesday, 09/02/14 05:04:39 PM
Re: surfkast post# 75652
Post # of 75663

Hypothetically, if a company had $2M in cash, and paid out $1M in a dividend distribution, the shareholders pay income on the $1M in taxes. If the issuer expects the shareholders to reinvest, they will have less than $1M after the tax consequence. Why move working capital around in a manner that is taxable? If the normal shareholder has approx. 15%, the issuer only gets $850K in return. Now the issuer has $1.85M.

Why are they doing this?

Companies hire tax specialists to reduce the tax liability, not increase it.