What are the tax implications for holders of the Series A Preferred Stock receiving this cash dividend?
Tax implications – For U.S. investors, the $0.546875 cash payout on the 8.75 % Series A cumulative redeemable perpetual preferred shares will be treated as ordinary (non‑qualified) dividend income. Preferred‑stock dividends rarely meet the “qualified‑dividend” requirements (the stock must be an ordinary common share that has been held for more than 60 days of the 121‑day period surrounding the ex‑dividend date). Because the Series A shares are a distinct class of preferred stock, the dividend does not receive the lower qualified‑dividend tax rates (0 %, 15 % or 20 %). Instead it is taxed at the shareholder’s ordinary federal income tax rate, which for most taxpayers ranges from 12 % to 37 % in 2025.
State taxes apply in the shareholder’s residence state (e.g., California, New York) and may add another 3‑13 % on the dividend. Non‑U.S. investors must consider any applicable withholding tax—generally 30 % unless reduced by a tax treaty. Because the dividend is paid on September 15, 2025, the amount will be reported on Form 1099‑DIV (Box 1) for the 2025 tax year, and the holder should ensure sufficient cash is set aside to cover the ordinary‑income liability.
Trading & actionable insight – The after‑tax yield on the preferred shares is therefore lower than the headline 8.75 % coupon. For a marginal federal rate of 35 % (plus a typical 5 % state rate), the effective after‑tax yield drops to roughly 5.4 % (8.75 % × [1 – 0.40]). Investors who are in high tax brackets may prefer comparable high‑yield corporate bonds or qualified‑dividend stocks, whereas income‑focused investors in lower brackets (e.g., 12 %–22 % federal) still obtain an attractive net yield.
From a market‑dynamic perspective, the cash dividend announcement tends to buoy the preferred‑stock price briefly on the ex‑dividend date (Aug 31) as holders capture the payout, then may see modest selling pressure afterward. Traders could consider entering long positions after the ex‑date if they believe the underlying equity (POWW) fundamentals support the 8.75 % coupon and if the premium to the fair‑value redemption price offers a margin of safety. Conversely, if you are a high‑tax bracket holder, a short‑term trade to capture the dividend and then unwind the position before the ex‑date may be more tax‑efficient than a long‑term hold. Always factor the ordinary‑income tax drag when calculating expected returns.