LMP Capital and Income Fund Inc. (SCD or “the Fund”; CUSIP: 50208A102) Announces Notification of Sources of Distributions
- None.
- None.
Insights
The distribution details provided by LMP Capital and Income Fund Inc. reflect the company's allocation of the paid distributions, which is a critical element for assessing the fund's performance and strategy. The significant portion of the distribution attributed to net realized long-term capital gains (48.29%) suggests a potentially successful year in terms of investment strategy, as these gains typically indicate profitable exits from long-term investments. However, the return of capital component (40.53%) is relatively high, which might raise concerns about the sustainability of the distributions. Investors typically prefer returns generated from net investment income and realized gains, as return of capital can imply that the fund is paying out from invested capital rather than from earned profits.
It is essential to consider the fund's objective and whether the return of capital aligns with its long-term strategy. A return of capital can sometimes be part of a strategic tax approach or a method to provide liquidity to shareholders. However, it can also suggest that the fund is not generating enough income and gains to cover distributions, potentially leading to a depletion of assets over time. Shareholders should closely monitor the fund's performance and the management's commentary on the distribution strategy to understand the implications for their investment.
From a taxation perspective, the composition of LMP Capital and Income Fund Inc.'s distributions has various implications for investors. The portion of the distribution classified as net investment income (11.18%) is typically subject to ordinary income tax rates. In contrast, net realized long-term capital gains are taxed at potentially lower long-term capital gains rates, which can be advantageous for shareholders.
The return of capital is not immediately taxed; instead, it reduces the shareholder's cost basis in the investment, which could result in a higher capital gain or lower capital loss when the shares are eventually sold. While this can provide a tax deferral benefit, it is crucial for investors to understand that a consistent return of capital could lead to tax complexities and potentially larger taxable gains in the future. It is advisable for shareholders to consult with tax professionals to understand the tax treatment of these distributions and plan accordingly.
Examining the distribution composition of LMP Capital and Income Fund Inc. in the context of the broader market and industry trends can provide valuable insights. The absence of net realized short-term capital gains indicates the fund's focus on longer-term investment strategies, which aligns with the typical approach of income-oriented funds aiming for stability and consistent returns over time.
The market research perspective would analyze how this distribution strategy compares with peer funds and whether the high return of capital is an industry norm or an outlier. A high return of capital could signal a competitive disadvantage if peers are achieving higher income and gains-based distributions. On the other hand, if this trend is widespread, it might reflect broader market conditions, such as low-interest rates, affecting the ability of income funds to generate high levels of investment income. Understanding these dynamics is crucial for investors when benchmarking the fund's performance and making informed investment decisions.
Notification of Sources of Distributions
Pursuant to Section 19(a) of the Investment Company Act of 1940
The Fund’s estimated sources of the distribution to be paid December 29, 2023, and for the fiscal year 2023 year-to-date are as follows:
Estimated Allocations for the December Quarterly Distribution as of November 30, 2023:
Distribution Per Share |
Net Investment Income |
Net Realized Short-Term Capital Gains |
Net Realized Long-Term Capital Gains |
Return of Capital |
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Cumulative Estimated Allocations fiscal year-to-date as of November 30, 2023, for the fiscal year ending November 30, 2023:
Distribution Per Share |
Net Investment Income |
Net Realized Short-Term Capital Gains |
Net Realized Long-Term Capital Gains |
Return of Capital |
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Shareholders should not draw any conclusions about the Fund’s investment performance from the amount of the current distribution or from the terms of the Plan. SCD estimates that it has distributed more than its income and net realized capital gains; therefore, a portion of the SCD distribution to shareholders may be a return of capital. A return of capital may occur, for example, when some or all of the money that a shareholder invested in a Fund is paid back to them. A return of capital distribution does not necessarily reflect SCD’s investment performance and should not be confused with ‘yield’ or ‘income’. The amounts and sources of distributions reported herein are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for 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 Fund will send a Form 1099-DIV to shareholders for the calendar year that will describe how to report the Fund’s distributions for federal income tax purposes.
Average Annual Total Return (in relation to the change in net asset value (NAV) for the 5-year period ended on 11/30/2023)1 |
Annualized Distribution Rate (as a percentage of NAV as of 11/30/2023)2 |
Cumulative Total Return (in relation to the change in NAV for the fiscal period through 11/30/2023)3 |
Cumulative Fiscal Year-To-Date Distribution Rate (as a percentage of NAV as of 11/30/2023)4 |
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Fund Performance and Distribution Rate Information:
- Average Annual Total Return in relation to NAV represents the compound average of the Annual NAV Total Returns of the Fund for the five-year period ended through November 30, 2023. Annual NAV Total Return is the percentage change in the Fund’s NAV over a year, assuming reinvestment of distributions paid.
- The Annualized Distribution Rate is the current fiscal period’s distribution rate annualized as a percentage of the Fund’s NAV as of November 30, 2023.
- Cumulative Total Return is the percentage change in the Fund’s NAV from November 30, 2022 through November 30, 2023, assuming reinvestment of distributions paid.
- The Cumulative Fiscal Year-To-Date Distribution Rate is the dollar value of distributions for the fiscal period November 30, 2022 through November 30, 2023, as a percentage of the Fund’s NAV as of November 30, 2023.
This Fund has a managed distribution policy that seeks to deliver the Fund’s long-term total return potential through regular monthly distributions declared at a fixed rate per common share. Distributions may be paid in part or in full from net investment income, realized capital gains and by returning capital, or a combination thereof. Shareholders should note, however, that if a Fund’s aggregate net investment income and net realized capital gains are less than the amount of the distribution level, the difference will be distributed from the Fund’s assets and will constitute a return of the shareholder’s capital. A return of capital is not taxable; rather it reduces a shareholder’s tax basis in his or her shares of the Fund. The Board of Directors of the Fund may 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.
For further information on LMP Capital and Income Fund Inc., please visit our web site at: www.franklintempleton.com/investments/options/closed-end-funds
Data and commentary provided in this press release are for informational purposes only. Franklin Resources and its affiliates do not engage in selling shares of the Funds.
Category: Distribution Related
Source: Franklin Resources, Inc.
Source: Legg Mason Closed End Funds
View source version on businesswire.com: https://www.businesswire.com/news/home/20231229610569/en/
Investor Contact: Fund Investor Services 1-888-777-0102
Source: Franklin Resources, Inc. and Legg Mason Closed End Funds
FAQ
What are the estimated sources of the distribution for LMP Capital and Income Fund Inc. (NYSE: SCD) to be paid on December 29, 2023?
What are the cumulative estimated allocations for the fiscal year 2023 year-to-date for LMP Capital and Income Fund Inc. (NYSE: SCD)?
