Which statement about dividends is true?

Dividends being subject to a lower tax rate is a significant aspect of the tax treatment of investment income. Qualified dividends, which are typically dividends received from stocks of U.S. companies or qualified foreign companies that have met specific holding period requirements, can be taxed at long-term capital gains rates, which are lower than ordinary income tax rates. This can result in considerable tax savings for individuals receiving these types of dividends.

The tax treatment of dividends is essential for investors since it influences their overall investment strategy and can affect the after-tax return on their portfolios. Understanding the criteria for dividends to be classified as qualified is crucial for maximizing tax efficiency.

Other statements do not accurately reflect the nature of dividends. For instance, dividends are not always taxable; some may be tax-exempt or fall under specific tax provisions that prevent taxation in certain situations. Additionally, dividends can be paid not only in cash but also in shares of stock or other property. Lastly, dividends are primarily distributed by corporations, not government entities, making the assertion about them being limited to government entities misleading. This context supports why the statement regarding qualified dividends is the true one among the options.