Stock that pays income in the form of regular dividends over an extended period is often described as income stock.
The advantage of owning income stock is that it can supplement your budget or provide new capital to invest. Unless you own the stock in a tax-deferred or tax-free account, you'll owe income tax each year on the dividends you receive.
But dividends on qualifying stock, including most US stock and some international stock, are usually taxed at your lower long-term capital gains rate. Income stock is an important component of most equity income funds and growth and income funds.
- Browse Related Terms: Back-up withholding, Custodial account, Estate, Estate tax, Gift tax, Income, Income in respect of a decedent, Income stock, National debt, Qualified domestic trust (QDOT), Revocable trust, Uniform Gifts to Minors Act (UGMA), Uniform Transfers to Minors Act (UTMA)