Are there any tax implications for investors receiving the supplemental dividend that could affect net returns?

Tax considerations – what the $0.01 supplemental dividend means for your bottom line

The $0.01 / share supplemental payout is treated the same way as the regular $0.35 dividend for tax purposes. For most U.S. investors it is ordinary (non‑qualified) dividend income and is taxed at the investor’s marginal ordinary‑income rate, not at the lower qualified‑dividend rate. Consequently, the after‑tax yield on the supplemental piece is typically lower than the pre‑tax 0.01 % it represents. Even in a low‑tax environment the 0.01 $ per share is modest, so the absolute tax drag is tiny, but for high‑income or “tax‑inefficient” investors the effective net return can be cut by 15‑30 % of that amount (e.g., a 30 % marginal rate reduces the 0.01 $ to about 0.007 $ in after‑tax terms). State and local taxes add another layer, especially for investors in high‑tax jurisdictions.

Trading implications

Because the supplemental dividend is small, the ex‑dividend price adjustment will be minimal (≈$0.01) and the market is unlikely to price‑in a large tax‑driven discount. However, the combined dividend yield (≈$0.36 per share) should be evaluated on an after‑tax basis when benchmarking the fund against peers. If the after‑tax yield falls below comparable high‑yield alternatives, the fund may see down‑pressure on its price as yield‑seeking investors shift to more tax‑efficient vehicles (e.g., qualified‑dividend stocks or tax‑advantaged accounts).

Actionable take‑aways

1. Hold the shares through the ex‑div date (Oct 31, 2025) if the pre‑tax yield still meets your return target; the tax drag on the supplemental piece is negligible in most portfolios.
   
2. Allocate the dividend‑paying portion to tax‑advantaged accounts (IRA, 401(k), etc.) to neutralize the ordinary‑income tax hit, especially for the supplemental dividend.
   
3. Re‑calculate the fund’s net yield after your marginal tax rate; if the after‑tax yield is materially lower than comparable funds, consider trimming exposure or rotating into higher‑qualified‑dividend securities.
   

In short, while the supplemental dividend’s tax impact is small in absolute terms, it does reduce the net return for investors in higher tax brackets and should be factored into any yield‑based trading decision.