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Re: PREMX year-end pay-out

CrashCrash
edited November 2016 in Fund Discussions
Hello!
What on earth does this MEAN?
"Based on current estimates, all or a significant portion of dividends paid in 2016 may be reclassified from income to return of capital or long-term capital gain. The tax character of dividends will be determined at year end and will be reported in January on your Form 1099-DIV."

OK, I found THIS: "With mutual funds, Return Of Capital is usually done because their underlying investments have not generated the annual income necessary to make the expected dividend payments to investors in a year. This essentially forces the manager to dip into the fund/trust/partnership's principal to come up with the money."

...That can't be good. Does this change the nature, the character, of this investment for me? I've been in PREMX since July, 2010.

Comments

  • heezsafe
    link, please.....
  • CrashCrash
    http://www.investinganswers.com/financial-dictionary/investing/return-capital-roc-914
    PREMX pays monthly, anyhow. And in my tax bracket, I don't pay tax on div or cap gains. But the footnoted notation at the TRP year-end estimated pay-out page (footnote number 5 for PREMX) leaves me wondering.
    https://individual.troweprice.com/public/Retail/Planning-&-Research/Tax-Planning/Dividend-Distributions/2016-Preliminary-Year-End-Distributions
  • JohnChisum
    Are you sure about not paying cap gains tax? As far as I know, if you have divies or cap gains, you pay tax.
  • CrashCrash
    @JohnChisum: Yes, the 10% and 15% bracket don't pay cap gains tax. And this is in a Trad. IRA, anyhow. My question, though, is about the "why." and whether this is a danger signal, a red flag, with regard to PREMX?
  • JohnChisum
    I would be interested in that answer too. TRP would have to fund the income requirement from what it says. That money comes from somewhere.
  • Derf
    I believe I came across the same situation , as I was looking at last years taxes. I'll take a look & see which fund this happen to & report back.
    Derf
    P.S. Probably happens more than one would guess.
  • CrashCrash
    edited December 2016
    PREMX. The fund is still up quite a bit in 2016, though bonds got hammered after the election. There's a good yield on it. What confuses me is: why would a fund continue to pay such a good monthly dividend ALL YEAR LONG, then decide after most of the year is behind us that some contingency measure must be resorted to? (Footnote 5 from est. year-end pay-out page at TRP.)
  • JohnChisum
    I just read their semi annual report from last June. Everything was rosy back then.

  • CrashCrash
    Derf said:

    I believe I came across the same situation , as I was looking at last years taxes. I'll take a look & see which fund this happen to & report back.
    Derf
    P.S. Probably happens more than one would guess.

    Thank you, @Derf. The thing is, the footnote I quoted (original post, above) states something. With no rhyme or reason. (Hello, shareholder. Just GUESS why this footnote was necessary, and what caused us to have to include it!)
  • JohnChisum
    I wonder if the result is as simple as not paying anything at the end of the year. It would be unusual for a bond fund for sure.
  • Derf
    Crash: I stand corrected. What I saw , paid in 2015 adjusted 2016. short-term cap. gains to qualified dividends. Sorry I couldn't help.
    Derf
  • JohnChisum
    It appears that this fund didn't pay cap gains last year either.

    https://fundresearch.fidelity.com/mutual-funds/fees-and-prices/77956H872

    I didn't know this fund was so exposed to South America. Venezuela's troubles may have something to do with this.
  • CrashCrash
    Ok, guys. Nice to know you're out there. @JohnChisum: PREMX has paid me over $1,300.00 in 2016, in monthly divs. If there is a very small cap gain---as in years past, all well and good. But they've been paying, right along. I'm gonna just call them. gotta run, right now. Thanks.
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