In 2000, I purchased shares of Imaging Dynamics Co. Ltd. (IDL) because I thought its digital X-Ray technology looked promising. At one point, I had 1,000 shares. However, the company has consolidated its shares several times over the years, including a one-for-20 consolidation this month, and now I have just two shares. Do you think there is a scam going on here? And with the share consolidations, how do I calculate my adjusted cost base?
I don’t know if it’s a scam, but it’s certainly been a terrible investment. The shares, which are listed on the TSX Venture Exchange, were the subject of a cease-trade order in May for the company’s failure to file audited financial statements. The stock resumed trading in November and last changed hands on Nov. 17 at 10.5 cents a share. Assuming you could sell at that price, your two shares would be worth a grand total of 21 cents. In other words, they’re pretty much worthless.
The shares do have some value, however, if you sell them for a capital loss. You could then carry the loss backwards up to three years or forward indefinitely to offset capital gains in those years and reduce your taxable income.
Even with all the share consolidations – I counted three since 2013 – determining your adjusted cost base (ACB) should be relatively simple. Just add up all of the money (plus commissions) you invested in the stock. That’s your total ACB. Your capital loss is the ACB minus any proceeds you receive when you sell your shares (which will be negligible, if not negative, after commissions). You may wish to ask your broker or the company’s transfer agent – depending on the form in which your shares are held – if it can help to facilitate a disposition of the shares. Keep in mind that you can only use the loss for tax purposes if the shares are held in a non-registered account.
I probably don’t need to remind you that investing in early-stage companies is a risky endeavour. That’s why I stick with established, dividend-paying stocks and broad index exchange-traded funds.
I see AT&T Inc. (T-NYSE) has a generous yield of more than 9 per cent. It seems like a good company, providing a service everyone needs, but the stock has been dropping. Why is the yield so high, and is this a red flag?
You are smart to ask questions when a yield climbs into the high single digits. In AT&T’s case, had you purchased the shares you would have been in for an unpleasant surprise.
In May, AT&T announced an agreement to spin out its WarnerMedia division and merge it with Discovery Inc. (DISCA) to create a standalone entertainment and streaming company. The deal, which is expected to close in mid-2022, represents a dramatic reversal for AT&T, coming just three years after it acquired the WarnerMedia assets then known as Time Warner.
Here’s the worst part for dividend investors: As part of the spinoff, AT&T said its dividend will be “resized to account for the distribution of WarnerMedia to AT&T shareholders.” The telecom company hasn’t specified how large the cut will be, but most predictions I’ve seen are in the neighbourhood of a 50-per-cent reduction.
The looming cut will end AT&T’s 36-year streak of dividend increases and remove the company from the S&P 500 Dividend Aristocrats club, whose members have at least 25 consecutive years of annual dividend increases.
Why did AT&T’s yield get so high? The simple answer is that the stock price has been in a long-term downtrend, reflecting soaring levels of debt to pay for acquisitions including WarnerMedia and DirecTV that have not panned out as hoped. Earlier this year, AT&T sold a 30-per-cent stake in DirecTV, which has been losing subscribers to streaming services such as Netflix and Disney+.
I was thinking about purchasing Algonquin Power & Utilities Corp. (AQN) but discovered its dividends are paid in U.S. dollars. I once received U.S. tax forms for limited partnership units that paid distributions in U.S. currency and I don’t want to go through that again. Are there any U.S. tax implications for Algonquin investors that I should be aware of?
No. Algonquin is not a limited partnership but a Canadian-based corporation that declares dividends in U.S. dollars. The utility operator and renewable power generator switched to paying in U.S. currency several years ago to reflect the growing contribution of its U.S. operations, but its dividends still qualify for the Canadian dividend tax credit. The same is true of other companies – such as Magna International Inc. (MG), Barrick Gold Corp. (ABX) and Restaurant Brands International Inc. (QSR) – that are based in Canada but declare dividends in U.S. dollars.
E-mail your questions to email@example.com. I’m not able to respond personally to e-mails but I choose certain questions to answer in my column.
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