A Dividend Received Deduction (DRD) applies to certain corporations that receive dividends from related entities and mitigates potential triple taxation effects.
There are different levels of possible deductions, ranging from 50% deduction of dividends received to 100% deduction.
There are several rules that corporate shareholders must follow in order to be eligible for a DRD.
For example, corporations cannot deduct dividends received from a real estate investment trust (REIT) or capital gains dividends received from a regulated investment company.
Dividends received from domestic corporations have different deduction rules than dividends received from foreign corporations.
Convertible preferred shares are a type of preferred shares that pay dividends and can be converted into ordinary shares at a fixed conversion rate after a certain period of time.
The dividend rate, expressed as a percentage or yield, is a financial ratio showing how much a company pays dividends annually in relation to its share price.
Dividend recapitalization is when a private equity firm issues new debt to raise money to pay special dividends to investors who helped finance the original purchase of the portfolio company.
Dividend yield, displayed as a percentage, is the amount of money a company pays shareholders for holding shares divided by the current price of its shares.
Forward dividend yield is the percentage of a company’s current share price that the company expects to pay out in dividends over a specified period of time, usually 12 months.