TGA-GIA Capital Management offers managed accounts consisting of pre-defined High Quality, High Yield Dividend Account(s). Through the firms fixed income securities team, we provide superlative, consistent, income that exceeds most traditional fixed accounts, while emphasizing the return of principle and liquidity for personal or retirement plan accounts.
TGA Capital Managed / Clients in preferred shares are generally those who wish to hold fixed-income investments in a taxable portfolio. Preferential tax treatment of dividend income, as opposed to interest income, may in many cases result in a greater after-tax return than might be achieved with bonds.
With a qualified dividend tax of 20% compared to a top ordinary marginal tax rate of 35%,[15] $1 of dividend income taxed at these rates provides the same after-tax income as approximately $1.30 in interest.
The size of the preferred stock market in the United States - has been estimated as USD$100-billion, as of early 2008, compared to USD$9.5 trillion for equities and USD$4.0 trillion for bonds.[16] The issuance of preferred stock began in the late 1800’s.
The advantages of a Managed Prefferred Account
Offer yields that are higher than bond market yields, money market yields and common stock yields.
Our Preferred accounts have low correlations with common stock returns, making them good diversifiers. They also have relatively low correlations with bonds, with expected volatility and returns between those of common stocks and bonds. This makes them a good complement to a bond portfolio.
TGA Capital Managed Account - Dividends have federal income tax significance for individual shareholders because of their potential eligibility for qualified dividend treatment and the resultant low 20% tax rate.
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THE QUALIFIED DIVIDEND INCOME (QDI) RULES:
As a result of tax law changes enacted in 2003, dividends received by individual taxpayers are taxed under both the regular income tax and the alternative minimum tax) at the low maximum tax rates applicable to long-term capital gains if the dividends constitute qualified dividend income (QDI).
This summarizes these new rules.
Summary of the QDI Tests
In order for dividends to be eligible for the lower 20% tax rate benefit under the qualified dividend income rules, a number of tests must be satisfied. There are six basic tests. Source-Denise Davidson, J.D. Stevie D. Conlon, J.D., C.P.A., CCH.
The Holding Period Test
The holding period test requires that you must hold stock for at least 61 days during the 121 day period beginning 60 days before the ex-dividend date. The ex-dividend date is the first date following the declaration of a dividend on which the buyer of a stock will not receive the next dividend payment. The relevant minimum holding period is 91 days during the 181 day period beginning 90 days before the ex-dividend date in the case of preferred stock, if the dividends are attributable to a period or periods in excess of 366 days. -- CCH Contact: Stevie Conlon
Simply, TGA-GIA Capital Management expertise since1982 utilizes; Fixed Income and Preferred stock, also called preferred shares, preference shares, or simply preferred, is a special equity security that has properties of both an equity and a debt instrument and is generally considered a hybrid instrument. Preferreds are senior (i.e. higher ranking) to common stock
In general, preferreds have preference to dividends payments. Almost all preferred shares have a negotiated fixed dividend amount. The dividend is usually specified as a percentage of the par value or as a fixed amount. For example Pacific Gas & Electric 6% Series A preferred. sometimes, dividends on preferred shares may be negotiated as floating i.e. may change according to a benchmark interest rate index such as LIBOR.
In addition to the straight preferred, as just described, there is great diversity in the preferred market. Additional types of preferred stock include: Prior Preferred Stock, Preference Preferred Stock, Convertible Preferred Stock, Cumulative preferred stock, Participating Preferred Stock These preferred issues offer the holders the opportunity to receive extra dividends if the company achieves some predetermined financial goals.
The investors who purchased these stocks receive their regular dividend regardless of how well or how poorly the company performs, assuming the company does well enough to make the annual dividend payments. If the company achieves predetermined sales, earnings or profitability goals, the investors receive an additional dividend.
TGA Capital Managed accounts are not subject to commissions, or other hidden costs. We are a fee-only advisory firm.
I always advice to seek competent guidance when applying these rules.
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