How to Reduce Paid In Capital

by Contributing Writer; Updated September 26, 2017

Capital that is contributed by investors, both potential investors and stock, is referred to as “Paid in Capital”. Paid in Capital is the contributed capital and additional paid in capital during common or preferred stock issuances and the par value of the shares. The paid in capital is essentially the company’s funds as a result of equity rather than business operations. You can find paid in capital listed under the stock holder’s equity or additional paid-in capital. Otherwise, paid in capital may be referred to as “contributed capital”. After reading this article you will have the knowledge to reduce paid in capital.

Reduce the Paid in Capital by earning a dividend at no cost

Step 1

Locate the additional paid in capital on the stockholder’s equity section of the balance sheet. Note that this is the amount you want to reduce. For example, if each share is commonly $10, but the stock is issued at a price of $15, then the paid in capital is x$5 per share. Evaluating the company’s performance before purchasing a stock is highly recommended.

Step 2

Purchase the stock after the dividend is announced.

Step 3

After collecting the dividend, sell the dividend for the same price you’ve purchased it for. You will have earned the dividend at no cost.

Warnings

  • Stock prices may adjust immediately, matching the payout.