Let's walk through an example of calculating look-through earnings. In this example, we'll use a fictional company, Company XYZ, in which you own stock. You own 10,000 shares of Company XYZ, which has a total of 100,000 outstanding shares, giving you a 10% ownership stake in the company. Company XYZ reported the following financial information for the year:
Dividends Paid: $50,000
Retained Earnings: $200,000
Tax Rate on Dividends: 20%
First, calculate the dividends you received. Assuming the $50,000 of dividends awarded was issued to all investors, your 10% stake would have warranted $5,000 of dividends. Second, calculate the proportional retained operating earnings the company kept instead of issuing a dividend. In this example, your 10% ownership relates to a share of $20,000 ($200,000 * 10%). Let's also assume the 20% tax rate on dividends means you'll pay $1,000 on the $5,000 of dividends you receive.
In this example, your final look through will be ($5,000 + $20,000 - $1,000) $24,000. Even though the investor only received gross dividends of $5,000, the investor has substantial value in the capital the company retained. In theory, the company will used retained earnings to grow, thus being able to issue larger dividends to the investor in the future.
https://www.investopedia.com/terms/l/look-through-earnings.asp
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