You can use this calculator to calculate the income that you will receive from dividends. Dividends are the monthly dividend payments that your corporation makes on the value of your shares.
I know what I’m doing. I’m a millionaire. I pay my dividends on my shares.
Yes, you can make money from dividends. You just need to be sure that you are using the right information.
Dividends are calculated by the difference between the value of your stock and the company’s tax rate. Companies pay this tax on the value of your shares because of the value of your stock. The difference between the value of your shares and the tax rate is the amount of your dividends. So a company with a high tax rate, like a stock that has a dividend of $1 per share, pays $1 per share in dividends.
For an example, let’s take the top taxed companies that pay dividends. There are two major ones, Berkshire Hathaway (BRKA) and Disney. Both of these companies pay out a dividend of 60 per cent of the value of their publicly-traded shares. So, for Berkshire Hathaway, this means that the company pays out 60 per cent of a company’s value in dividends.
The dividend yield is the amount of the dividend multiplied by the rate of the dividend. So for Berkshire Hathaway, the dividend yield is 0.60. So the dividend yield is 0.60 times 60 per cent = 6 per cent. Now, what do we know about taxes? We know that the federal income tax rate is 35 per cent, so Berkshire Hathaway pays $4 per share in federal income taxes.
You’d think Berkshire Hathaway would be in the clear, but it’s not. The company is subject to a state tax of 30 per cent, but the state in question is Massachusetts, where they are taxed at their state’s rate (30 per cent). So, for Berkshire Hathaway, the federal tax rate is 8 per cent. So the net tax rate is 8 per cent times 30 per cent 9 per cent.
But that isn’t all. The state tax on dividends is 30 per cent, so the net tax rate is 30 per cent times 9 per cent. So, to calculate what Berkshire Hathaway receives as a result of dividends, we just need to know the net tax rate and the dividend rate. In this case, the rate is 8 per cent times 30 per cent times 9 per cent, which is 8 per cent times 30 per cent.
So, to find the rate that Buffett should receive as a result of dividends, we just need to divide 8 per cent times 30 per cent by 4 per cent, which is about $1 billion.
That’s only the top-line, of course. After that, you have to multiply it by the dividend yield (which, again is about 1 billion), and also the tax rate. But it’s a lot easier than it was before. We now know a lot more about Buffett, and it’s easier to calculate what he gets as a result of dividends.