Royal Oak Realty Trust Announces Favorable Tax Treatment of 2023 Dividends

Jan 23, 2024
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On January 23, 2024, Royal Oak Realty Trust (Royal Oak) announced tax treatment for 2023 dividends paid. The taxability of Royal Oak’s dividends paid during the 2023 calendar year is 21.87%. The taxable income is 11.54% ordinary income and 10.33% capital gains distribution as a result of the sale of certain real estate. The balance, 78.13%, is deferred as a return of capital.

When we meet with investors, we always express that there are tax advantages to our dividend.  We often compare the Royal Oak dividend with other investment opportunities that have no tax advantages and are fully taxable at ordinary income rates.  We call this the Tax Equivalent Yield. The Tax Equivalent Yield for 2023 was 10.28%. This means an investor would need to have purchased a fully taxable investment that yielded 10.28% in 2023 to be equivalent to the 6.11% yield Royal Oak paid in 2023 (this assumes the investor pays tax at the top federal tax bracket with an estimated state tax rate of 4%).

The portion treated as a return of capital is considered tax deferred as it reduces the tax basis in your Royal Oak investment. As such, any capital gain will be larger at the time the investment is sold (unless there is a basis step-up due to death).

Please note: this information is not investment, financial, legal, or tax advice as each investor’s situation varies.