in short: it can not pay out more than it makes in the long run. otherwise eventually it will have returned all your capital along with its declining income. generally its not a good sign when payouts exceed income. one or two quarters, payouts may exceed income in order to sustain stock value. payment in kind with additional stock also is a red flag. the tax issue just confuses things and is generally irrelevant. just like GE paying out more in dividends than it makes this past quarter. not a long run sustainable thing. something will give: either increase in income; decrease in stock value; or vacate the field. assuming this economic plunge will continue for a while, expect payouts to decrease, stock to decline, and payments in stock rather than $$ will occur.