Capture the Dividend: Why Tri-Continental's Capital Gains Offer a Tax-Smart Opportunity Now

Tri-Continental Corporation (NYSE: TY), a closed-end fund with an 81-year unbroken streak of dividend payments, is poised to deliver a compelling tax-efficient opportunity for income-seeking investors. With its upcoming capital gains distribution—set to be declared on June 16, 2025—investors can strategically position themselves to capture a robust $0.5637 per-share long-term capital gains component, all while choosing how to receive the payout. This is a rare chance to pair dividend discipline with tax optimization, but time is short: the ex-dividend date looms, and the window to act closes soon.

The Election Advantage: Flexibility Meets Tax Efficiency

Unlike many funds that force investors to take distributions in a single form, Tri-Continental offers three distinct election options for its capital gains payout, each tailored to different financial strategies:
1. 75% stock / 25% cash: Ideal for investors who want to reinvest in the fund while still receiving immediate liquidity.
2. 50% stock / 50% cash: A balanced approach for those seeking growth and income.
3. 100% cash: Perfect for retirees or tax-sensitive investors who prefer liquidity and want to avoid holding additional shares.

This flexibility is a critical edge. The long-term capital gains portion ($0.5637) qualifies for favorable tax treatment—up to 20% federal, depending on income—compared to short-term gains taxed at ordinary income rates (up to 37%). By strategically selecting their payout form, investors can minimize tax drag while aligning with their broader financial goals.

Stability Through Decades of Discipline

Tri-Continental’s 81-year dividend history speaks to its resilience. This fund has weathered recessions, market crashes, and interest rate cycles while maintaining payouts, a record few can match. Its consistency stems from a disciplined approach to capital allocation and a diversified portfolio of fixed-income and equity holdings.

The fund’s current yield, bolstered by its ordinary income distribution ($0.2900 per share) and the capital gains payout, positions it as a high-yield option in today’s low-interest-rate environment. For income investors, this is a rare blend of predictability and return.

Navigating the Risks: NAV Discount and Leverage Exposure

No investment is without risk. Tri-Continental’s shares often trade at a discount to their net asset value (NAV), a common feature of closed-end funds. This discount can fluctuate based on market sentiment, but historically, it has averaged around 5-8%—a price investors pay for the fund’s liquidity and dividend reliability.

Leverage exposure is another consideration. The fund uses borrowings to amplify returns, which can boost income but also magnify losses during downturns. However, its management by Columbia Threadneedle—a seasoned asset manager—has kept leverage disciplined, with debt-to-equity ratios well within industry norms.

The Clock is Ticking: Act Before June 16

The ex-dividend date of June 16, 2025, is a hard deadline. To qualify for the distribution, investors must own shares by the close of trading on that day. This creates a clear catalyst for buying pressure in the coming weeks.

For those focused on tax efficiency, the long-term capital gains component is a golden ticket. For example, a taxpayer in the 20% long-term gains bracket holding 1,000 shares would pay $112.74 in taxes on the long-term portion—far better than the $370 owed under the 37% ordinary income rate.

Final Call: A Rare Opportunity for Income and Tax Smarts

Tri-Continental’s combination of dividend reliability, tax-advantaged distributions, and strategic payout flexibility makes it a standout option for 2025. The fund’s history, yield, and the June 16 deadline create a compelling case for immediate action.

Investors should act now to secure their shares and choose their distribution preference. With the election deadline tied to the record date, procrastination could mean missing out on this tax-efficient windfall.

In a market where predictability is scarce, Tri-Continental’s 81-year track record and June 2025 distribution offer a rare blend of income, stability, and tax strategy. Don’t let this opportunity slip away—act before the clock runs out.