By purchasing the stock of a company, you become a partial owner of the company. As an owner, you are entitled to a share of the company's profits. Your total earnings are distributed through dividends and capital gains. Dividends are direct cash payments from the company to its shareholders as a distribution of profits. Capital gains are the profits made from selling your shares at a higher price than the original purchase price. Your total equity income is a combination of your annual dividends and capital gains.
Review your investment statements to see which companies paid dividends throughout the year.
Add up the total value of your dividends for the year. Some companies pay dividends more than once per year. Be sure to record all your dividends in this calculation.
Make a list of all the stocks sold for a gain throughout the year. Record how long you owned each stock on this list.
Categorize your stock sales between short-term and long-term gains. Stocks held for less than one year returned short-term gains. Stocks held for more than one year returned long-term gains.
Combine the value of your dividends, your short-term gains and your long-term gains for the year. This calculates your total equity income.
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