A Stock That Has Raised Its Dividend Every Year Since 1963 Just Hit a Record High. It Handed a Couple Living on the Checks a $67,000 Reason Not to Sell

详细摘要

A beverage maker that has raised its dividend every year since 1963 closed Friday at a record high. For a retired couple living on 20,000 of its shares, Social Security and a cash reserve, the federal income tax bill is $0. Here is why selling a quarter of the position at the top would cost about $67,000.

Coca-Cola (NYSE: KO), which has raised its dividend every year since 1963, closed Friday at a record $99.25 a share, up 42% this year. For a retired couple who own 20,000 of its shares and live on the checks, the record high raises a question they have not had to ask in years: whether to sell some. The answer in their numbers is a $67,000 reason to leave the shares alone, and it starts with a federal income tax bill of $0 on about $100,000 a year of income.

The couple is a scenario, built to show the arithmetic. He is 70 and she is 68. At the end of 1999 he bought 10,000 shares for about $580,000, the 2012 split doubled the count to 20,000, and he never sold. At Friday's close the lot is worth about $1,980,000. They collect $4,000 a month in Social Security between them and keep $300,000 in Treasury bills and CDs, which earn about $12,000 a year. The dividend on the 20,000 shares is $42,400 a year, $10,600 every quarter. Everything else, their house and their cars, is paid for.

For many Americans, funding a 401(k) only leads to more retirement questions. Should you roll your 401k into an IRA, and when? What's the tax impact if the rollover check gets made out to the wrong name? When do required withdrawals begin, and how much do you have to take?

A record high in a stock you bought for the checks reads as a signal to take some money off the table, and that is a fair reading; the limit is that the tax bill on a 27-year-old gain is the biggest number in the decision, and no tax rule makes 87% of your money in one stock safe. Here is what the shares pay, what they did to this couple for a decade, what the IRS takes from a household living on the dividends, and what cashing in a quarter of the position at the top would cost.

Coca-Cola pays $0.53 a share every quarter, $2.12 a year, after a 3.9% raise in February. That was the 64th straight annual increase. On the couple's 20,000 shares the dividend is $42,400 a year, and at Friday's price the yield is 2.1%.

The couple's own…

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