Cohen & Steers Total Return Realty Fund, Inc. (RFI) Notification of Sources of Distribution Under Section 19(a)
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Insights
The distribution details provided by Cohen & Steers Total Return Realty Fund, Inc. (RFI) outline the composition of their monthly distributions, which is a critical element for investors concerned with the source of their dividend income. The emphasis on net investment income and net realized long-term capital gains as the primary components of the distribution is a pivotal point. A high percentage of the distribution coming from net investment income, which accounts for 78.38% of the current distribution, suggests a stable income-generating portfolio. Conversely, the substantial portion of the distribution from net realized long-term capital gains, representing 63.91% of the fiscal year-to-date distributions, indicates the Fund is also realizing gains from its investment strategy.
It is important to note that a return of capital component can signal that a portion of the distribution is not from income but from the principal investment itself. However, in this case, the return of capital is negligible, which can be seen as a positive sign for the Fund's income-generating capabilities. The absence of short-term capital gains in the distribution suggests a focus on longer-term investments, which may appeal to investors seeking consistent performance over more speculative short-term gains.
Investors should understand that distributions can affect the tax basis of their holdings, which has implications for capital gains taxes when the shares are sold. The Fund's managed distribution policy, allowing for regular monthly income, can also be a double-edged sword; it provides predictability but could lead to a reduction in capital if the distributions exceed the income and realized gains. Therefore, the Fund's ability to maintain these distributions without eroding the principal is a key factor for long-term sustainability.
From a tax perspective, the composition of the Fund's distributions is highly relevant. The differentiation between net investment income, net realized long-term capital gains and return of capital is crucial for shareholders' tax planning. Distributions classified as net investment income or net realized capital gains are taxable events, whereas return of capital is not immediately taxable but rather reduces the shareholder's cost basis in the Fund.
Investors should be aware that the final tax characteristics of the distributions will only be confirmed at year-end, necessitating potential adjustments in their tax filings. The information regarding the tax nature of distributions from REIT investments is particularly nuanced, as it can retroactively change the tax treatment of past distributions once the REITs report their dividends. This could lead to a reclassification between taxable income and return of capital, affecting investors' after-tax returns.
Given that the final tax characteristics are provided on Form 1099-DIV after the close of the calendar year, shareholders must stay informed and possibly consult with tax professionals to accurately report their income and understand the tax implications of their investment in the Fund.
Investors evaluating the Fund's distribution policy should consider the sustainability and consistency of the distributions. The managed distribution policy, which seeks to deliver long-term total return potential, may be attractive for those seeking regular income. However, the Board's ability to amend, terminate, or suspend this policy presents a degree of uncertainty and potential risk to the market price of the Fund's shares.
The reliance on long-term capital gains for a significant portion of the distributions could be indicative of the Fund's successful investment strategy, but it also raises questions about the repeatable nature of these gains. Market conditions and portfolio performance can vary, potentially affecting the amount of future distributions. As with any investment, there is a balance between the desire for immediate income and the need for long-term capital appreciation.
Lastly, investors should be cognizant of the Fund's performance relative to its peers and the broader market, as well as the impact of the distribution policy on the Fund's net asset value. The Fund's approach to realizing and distributing capital gains may differ from other funds, which could influence an investor's decision to hold, purchase, or sell shares based on individual financial goals and risk tolerance.
In December 2011, the Fund implemented a managed distribution policy in accordance with exemptive relief issued by the Securities and Exchange Commission. The managed distribution policy seeks to deliver the Fund's long-term total return potential through regular monthly distributions declared at a fixed rate per common share. The policy gives the Fund greater flexibility to realize long-term capital gains throughout the year and to distribute those gains on a regular monthly basis to shareholders. The Board of Directors of the Fund may amend, terminate or suspend the managed distribution policy at any time, which could have an adverse effect on the market price of the Fund's shares.
The Fund's monthly distributions may include long-term capital gains, short-term capital gains, net investment income and/or return of capital for federal income tax purposes. Return of capital includes distributions paid by the Fund in excess of its net investment income and net realized capital gains and such excess is distributed from the Fund's assets. A return of capital is not taxable; rather, it reduces a shareholder's tax basis in his or her shares of the Fund. In addition, distributions from the Fund's investments in real estate investment trusts (REITs) may later be characterized as capital gains and/or a return of capital, depending on the character of the dividends reported to the Fund after year-end by REITs held by the Fund. The amount of monthly distributions may vary depending on a number of factors, including changes in portfolio and market conditions.
At the time of each monthly distribution, information will be posted to cohenandsteers.com and mailed to shareholders in a concurrent notice. However, this information may change at the end of the year because the final tax characteristics of the Fund's distributions cannot be determined with certainty until after the end of the calendar year. Final tax characteristics of all of the Fund's distributions will be provided on Form 1099-DIV, which is mailed after the close of the calendar year.
The following table sets forth the estimated amounts of the current distribution and the cumulative distributions paid this fiscal year-to-date from the sources indicated. All amounts are expressed per common share.
DISTRIBUTION ESTIMATES | December 2023 | YEAR-TO-DATE (YTD) December 31, 2023* | ||
Source | Per Share | % of Current | Per Share | % of 2023 |
Net Investment Income | 78.38 % | 34.13 % | ||
Net Realized Short-Term Capital Gains | 0.00 % | 0.00 % | ||
Net Realized Long-Term Capital Gains | 21.62 % | 63.91 % | ||
Return of Capital (or other Capital Source) | 0.00 % | 1.96 % | ||
Total Current Distribution | 100.00 % | 100.00 % | ||
You should not draw any conclusions about the Fund's investment performance from the amount of this distribution or from the terms of the Fund's managed distribution policy. The Fund estimates that it has distributed more than its income and capital gains; therefore, a portion of your distribution may be a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the Fund is paid back to you. A return of capital distribution does not necessarily reflect the Fund's investment performance and should not be confused with 'yield' or 'income'. The amounts and sources of distributions reported in this Notice are only estimates, are likely to change over time, and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for accounting and tax reporting purposes will depend upon the Fund's investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The amounts and sources of distributions year-to-date may be subject to additional adjustments.
*THE FUND WILL SEND YOU A FORM 1099-DIV FOR THE CALENDAR YEAR THAT WILL TELL YOU HOW TO REPORT THESE DISTRIBUTIONS FOR FEDERAL INCOME TAX PURPOSES.
The Fund's Year-to-date Cumulative Total Return for fiscal year 2023 (January 1, 2023 through November 30, 2023) is set forth below. Shareholders should take note of the relationship between the Year-to-date Cumulative Total Return with the Fund's Cumulative Distribution Rate for 2023. In addition, the Fund's Average Annual Total Return for the five-year period ending November 30, 2023 is set forth below. Shareholders should note the relationship between the Average Annual Total Return with the Fund's Current Annualized Distribution Rate for 2023. The performance and distribution rate information disclosed in the table is based on the Fund's net asset value per share (NAV). The Fund's NAV is calculated as the total market value of all the securities and other assets held by the Fund minus the total liabilities, divided by the total number of shares outstanding. While NAV performance may be indicative of the Fund's investment performance, it does not measure the value of a shareholder's individual investment in the Fund. The value of a shareholder's investment in the Fund is determined by the Fund's market price, which is based on the supply and demand for the Fund's shares in the open market.
Fund Performance and Distribution Rate Information:
Year-to-date January 1, 2023 to November 30, 2023 | |
Year-to-date Cumulative Total Return1 | 5.24 % |
Cumulative Distribution Rate2 | 8.50 % |
Five-year period ending November 30, 2023 | |
Average Annual Total Return3 | 5.82 % |
Current Annualized Distribution Rate4 | 8.50 % |
1. | Year-to-date Cumulative Total Return is the percentage change in the Fund's NAV over the year-to-date time period |
2. | Cumulative Distribution Rate for the Fund's current fiscal period (January 1, 2023 through December 31, 2023) |
3. | Average Annual Total Return represents the compound average of the Annual NAV Total Returns of the Fund for |
4. | The Current Annualized Distribution Rate is the current fiscal period's distribution rate annualized as a percentage |
Investors should consider the investment objectives, risks, charges and expense of the Fund carefully before investing. You can obtain the Fund's most recent periodic reports, when available, and other regulatory filings by contacting your financial advisor or visiting cohenandsteers.com. These reports and other filings can be found on the Securities and Exchange Commission's EDGAR Database. You should read these reports and other filings carefully before investing.
Shareholders should not use the information provided here in preparing their tax returns. Shareholders will receive a Form 1099-DIV for the calendar year indicating how to report Fund distributions for federal income tax purposes.
Website: https://www.cohenandsteers.com/
Symbol: (NYSE: CNS)
About Cohen & Steers. Cohen & Steers is a leading global investment manager specializing in real assets and alternative income, including real estate, preferred securities, infrastructure, resource equities, commodities, as well as multi-strategy solutions. Founded in 1986, the firm is headquartered in
Forward-Looking Statements
This press release and other statements that Cohen & Steers may make may contain forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which reflect the company's current views with respect to, among other things, its operations and financial performance. You can identify these forward-looking statements by the use of words such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "seeks," "approximately," "predicts," "intends," "plans," "estimates," "anticipates," or the negative versions of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties.
Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. The company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.
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SOURCE Cohen & Steers, Inc.
FAQ
What information does Cohen & Steers Total Return Realty Fund, Inc. (NYSE: RFI) provide to shareholders?
When did the Fund implement the managed distribution policy?
What does the managed distribution policy seek to deliver?
What may the Fund's monthly distributions include?
What factors may affect the amount of monthly distributions?
