Replies to post #155593 on Biotech Values

[DewDiligence]

(PCL)—Are there other dividend-paying stocks you know of which benefit from that same tax code quirk?

The tax-code quirk pertains to timber growing, specifically. Other timber REIT’s such as WY, RYN, and PCH may report a portion of their dividend payments as LT capital gains—I haven’t checked to see how much. However, only PCL is a “pure play” timber REIT in the sense that almost all of its income is passive and thereby qualifies for the tax break.

[biomaven0]

Last year, the two classes of preferred stock of a small E&P oil and gas company, MHR, was treated as return of capital. That's actually even more advantageous than being treated as a cap gain - you pay no tax now, but instead reduce your basis. (I believe the reason for the treatment is that the company has no retained earnings - I knew this treatment applied to Common, but was surprised to see it also applied to Preferred).

The MHR "C" has a higher yield (just under 10%) but potentially could be called at any time and is trading at a bit above par. The "D"'s have a yield of nearly 9% because the company is unprofitable and fairly highly leveraged. But my take is that if necessary they could sell assets and/or reduce exploration costs, so I see the preferreds as a reasonable investment for someone looking for higher yields. (I own both classes, but not in any great size).

Peter