Priced for perfection
Q. What does the term “priced for perfection” mean? — R.W., Palmer, Alaska
A.
It’s often used when referring to a seemingly overvalued stock. It suggests that investors have high expectations for the company and that their enthusiastic buying has pushed the share price up to a high valuation. It also suggests some riskiness because if the company makes any mistakes or there’s some bad news, the stock could take a big hit.
You might avoid such a scenario by favoring “value investing” — seeking healthy, growing companies whose stocks are priced considerably below what you see as their intrinsic value. That builds in a margin of safety, which can reduce your risk if the share price drops.
Q. Are stock dividends really taxed twice? — P.T., South Kensington, Maryland
A.
Usually, yes. Here’s how: Imagine that Buzzy’s Broccoli Beer (ticker: BRRRP) reports $120 million in sales. After subtracting various expenses, it keeps $30 million, which is subject to taxation.
With its post-tax profits, Buzzy’s might build a new factory, buy more advertising, hire more employees, repurchase some of its shares of stock and/or pay dividends to shareholders, among other things.
Any dividends that Buzzy’s pays out are generally considered taxable income for shareholders. That’s how dividends can get taxed twice — first, the company is taxed on its income, and then after it pays shareholders, it is typically taxed on those payments, too.
Some prefer companies to build more value for shareholders without paying out dividends. For instance, companies might repurchase some shares. Doing so reduces the share count, boosting each remaining share’s stake in the company, and it doesn’t generate taxable income. Repurchasing shares is wasteful, though, when a stock is overpriced.
Guard from Social Security scams
There are many scammers out there, and they love to target senior citizens. The FBI’s most recent Elder Fraud Report noted that in 2021, more than 92,000 victims over 60 years old reported losing
$1.7 billion to fraud — that’s 74% more than in 2020. Victims lost $18,246, on average, and 3,133 people lost more than $100,000.
Common senior scams involve Social Security. You might, for example, receive an alarming phone call, email or text suggesting that you’re in trouble. It might say that your Social Security benefits are about to be canceled unless you take certain actions — now. You might be pressured to give out personal information, such as your Social Security number, birthdate and/or financial account numbers. The scammers might demand that you pay some money immediately.
Any of those things should serve as a big red flag. Know that the Social Security Administration will never call you out of the blue or threaten that you must pay money immediately. If there’s ever an issue, the SSA is likely to send you a letter, or it might email or text you if you have opted in for such communications. It usually requests payments via online bill pay or Pay.gov, or in person at its many offices. If you’re ever in doubt, just contact the SSA directly and ask.
You can proactively prevent being targeted for a Social Security scam by signing up for a “my Social Security” account at SSA.gov. Everyone should do so, even if they’re far from retirement. Once you do, you can check in any time and see the SSA’s record of your earnings and estimates of your benefits.
You can also update your contact information and manage your benefits online. If you haven’t set up such an account, a scammer might set one up for you, aiming to collect your benefits.