What are the tax implications for holders of the Series A Depositary Shares receiving the preferred dividend?

Tax considerations: For U.S. shareholders, the cash dividend paid on Brighthouse Financial’s Series A Depositary Shares is treated as a non‑qualified (ordinary‑income) dividend because it is paid on non‑cumulative preferred stock and does not meet the qualified‑dividend criteria (e.g., holding period, corporate‑level tax‑paid). Consequently, the amount received will be taxed at the shareholder’s ordinary marginal tax rate rather than the lower qualified‑dividend rate. For qualified‑dividend‑eligible investors (e.g., those holding the underlying preferred shares for more than 60 days and meeting the “qualified” criteria), the dividend could be taxed at the preferred‑dividend rate, but the non‑cumulative nature and the fact that the depositary shares represent a 1/1,000th interest in a preferred share make it unlikely to qualify. Foreign investors will generally be subject to a 30 % U.S. withholding tax (reduced to 15 % or lower under applicable tax treaties) on the dividend, with the ability to claim a credit on their home‑country tax return. The dividend is not tax‑deferred—it must be reported in the year of receipt (the ex‑dividend date is likely around September 15, 2025), and the amount should be reflected on the shareholder’s Form 1099‑DIV (U.S.) or the foreign equivalent.

Trading implications: Because the dividend is taxed as ordinary income, high‑tax‑bracket investors may price the ex‑dividend drop more aggressively than they would for qualified‑dividend stocks, potentially depressing the post‑ex price by roughly the after‑tax value of the payout. Traders should therefore anticipate a modest price‑adjustment on the record date (Sept 10) and a possible temporary dip on the ex‑dividend date (likely Sept 15). For investors in tax‑advantaged accounts (IRAs, 401(k)s, etc.) the tax impact is neutralized, which may make the depositary shares relatively more attractive for buying ahead of the ex‑date. Conversely, taxable‑account holders should weigh the after‑tax yield against the risk of a price decline; a short‑term bearish position could be justified if the expected after‑tax return is insufficient relative to the market‑wide risk‑adjusted return expectations. Keep an eye on the overall yield (6.600% on a 1/1,000th interest) and compare it to the effective tax‑adjusted yield to determine whether the dividend‑capture strategy is worthwhile.