NexPoint Real Estate Finance Announces 2023 Dividend Income Tax Treatment
- The total distribution amount is $2.74 per share
- Series A Preferred Shares had a total distribution of $2.125 per share
- Additional information related to capital gain distributions and the application of Section 858 to a portion of its current year dividends from the REIT's 2022 Earnings & Profits.
- None.
Insights
The detailed breakdown of NexPoint Real Estate Finance's dividend distributions for various stock classes provides a clear view of the tax implications for investors. Notably, 100% of the Taxable Ordinary Income is classified as a qualified REIT dividend, which is significant for investors considering the tax benefits under Section 199A of the Internal Revenue Code. This allows for a potential 20% deduction on these dividends for eligible taxpayers, which could influence investor decisions regarding portfolio composition.
Furthermore, the application of Section 858 to a portion of the dividends indicates a strategic use of the REIT's 2022 Earnings & Profits, which could affect the company's taxable income and ultimately impact its financial strategy and investor's tax planning.
From a financial perspective, the allocation of dividends between Taxable Ordinary Income, Capital Gain Distributions and Return of Capital is crucial for assessing the company's performance and sustainability of its dividend policy. The high percentage of Return of Capital for common shares, at 36.59%, might suggest that a significant portion of the dividend payments is not covered by the company's earnings, potentially a red flag for long-term dividend sustainability. However, this could also be a result of strategic tax planning or reinvestment policies.
Investors should also note the absence of capital gains distributions for the Series B Preferred Shares. This could indicate that the company is not realizing significant capital gains from property sales or other investments, which could inform investors about the company's operational focus and asset management strategy.
As a Real Estate Investment Trust (REIT), NexPoint's distributions are closely tied to its real estate earnings and profits. The disclosure related to Section 1061 is pertinent, as it informs investors about the nature of capital gains distributions, which for NexPoint are not related to Section 1231 gains, typically associated with the sale or exchange of real property. This information can be crucial for investors with applicable partnership interests, as it affects the taxation of long-term capital gains.
The absence of Section 897 Capital Gains, which pertains to gains by nonresident aliens and foreign corporations from U.S. real property interests, suggests that the company's investor base or the nature of its capital gains does not trigger these considerations, which could be indicative of the company's domestic investment strategy.
Common Shares (CUSIP #65342V101) | ||||||
Ex | Record | Payable | Distribution | Taxable | Capital Gain | Return of |
3/14/2023 | 3/15/2023 | 3/31/2023 | ||||
3/14/2023 | 3/15/2023 | 3/31/2023 | ||||
6/14/2023 | 6/15/2023 | 6/30/2023 | ||||
6/14/2023 | 6/15/2023 | 6/30/2023 | ||||
9/14/2023 | 9/15/2023 | 9/29/2023 | ||||
9/14/2023 | 9/15/2023 | 9/29/2023 | ||||
12/14/2023 | 12/15/2023 | 12/29/2023 | ||||
12/14/2023 | 12/15/2023 | 12/29/2023 | ||||
Totals | ||||||
100.00 % | 61.41 % | 2.00 % | 36.59 % | |||
Series A Preferred Shares (CUSIP #65342V408) | ||||||
Ex | Record | Payable | Distribution | Taxable | Capital Gain | Return of |
1/12/2023 | 1/13/2023 | 1/25/2023 | ||||
4/12/2023 | 4/13/2023 | 4/25/2023 | ||||
7/12/2023 | 7/13/2023 | 7/25/2023 | ||||
10/12/2023 | 10/13/2023 | 10/25/2023 | ||||
Totals | ||||||
100.00 % | 96.01 % | 3.99 % | 0.00 % | |||
Series B Preferred Shares (CUSIP #65342V507) | ||||||||
Ex | Record | Payable | Distribution | Taxable | Capital Gain | Return of | ||
12/21/2023 | 12/22/2023 | 1/5/2024 | ||||||
Totals | ||||||||
100.00 % | 100.00 % | 0.00 % | 0.00 % | |||||
(1) | ||||||||
(2) The Section 897 Capital Gain amount is equal to | ||||||||
(3) Pursuant to Treasury Regulation §1.1061-6(c), NexPoint Real Estate Finance is disclosing additional information related to the | ||||||||
capital gain distributions reported on Form 1099-DIV, for purposes of Section 1061. Section 1061 is generally applicable to | ||||||||
direct and indirect holders of "applicable partnership interests." The "One Year Amounts Disclosure" is equal to | ||||||||
total capital gain distribution and the "Three Year Amounts Disclosure" is equal to | ||||||||
of the capital gains distributions relate to Section 1231 gains. | ||||||||
(4) The Company has elected to apply Section 858 to a portion of it's current year dividends from the REIT's 2022 Earnings & Profits. | ||||||||
The Section 858 election was applied to the Common and Series A Preferred Dividends payable in Q1 2023. | ||||||||
About NexPoint Real Estate Finance, Inc.
NexPoint Real Estate Finance, Inc., is a publicly traded REIT, with its shares listed on the New York Stock Exchange under the symbol "NREF" primarily focused on originating, structuring and investing in first-lien mortgage loans, mezzanine loans, preferred equity, convertible notes, multifamily properties and common equity investments, as well as multifamily commercial mortgage-backed securities securitizations, multifamily structured credit risk notes and mortgage-backed securities. More information about the Company is available at nref.nexpoint.com.
CONTACTS
Investor Relations
Kristen Thomas
IR@nexpoint.com
Media Relations
Prosek Partners for NexPoint
pro-nexpoint@prosek.com
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SOURCE NexPoint Real Estate Finance, Inc.
FAQ
What are the final income allocations announced by NexPoint Real Estate Finance, Inc. for its 2023 dividend distributions?
What is the total distribution for the Series A Preferred Shares?
What additional information did the company disclose related to capital gain distributions?
