Comments on Dividend Growth Investor: Will higher taxes bring dividend stocks down?

Annual Gain MLP's will be affected too, becau...

2010-07-14T17:37:17.544-07:00

Annual Gain

MLP's will be affected too, because the taxable income portion would be taxed at ordinary income tax rates, which are also increasing. While a major portion of MLP distributions is return on capital, when you sell higher rates on capital gains will affect you.

David,

Thanks for the note about ABT dividend yield. It is interesting to note that most companies in the dividend aristcrats list that I like are starting to yield more than what htey have yielded in many years.

JW,

I am not a big fan of buybacks. You sort of answered your own question - companies tend to buyback shares at inflated prices when times are great, only to dillute the number of shares outstanding at depressed prices when times are bad. For reference check General Electric (GE) over the past 5 years.

You know IMO regular quarterly stock buys (not off...

2010-07-14T14:03:31.157-07:00

You know IMO regular quarterly stock buys (not offset by new shares given to employees) would be just as good as dividends but I do not know of any companies that do stock buy backs quarterly. Why not?

I'm with 'ya on this. Most of these compa...

2010-07-12T08:25:22.855-07:00

I'm with 'ya on this. Most of these companies pay dividends as a matter of policy to return to the shareholders income derived from the business. Yea, might be some companies that tweak their payouts based on a change in the tax law, but I suspect not many will turn the train around based on a nudge upward in taxes. Many owners of dividend stocks aren't in the higher brackets anyway, so the effect of higher taxes is not as bad as it may seem.

By the way, I noticed over the week-end that the yield on Abbott Labs is the highest it has been since 1974 (5.07%), during that bear market. A chart of its dividend yield shows it rarely exceeding the 3% level. The stock has basically been stuck in a broad trading range since 1998/2000up to today, while the dividend payout has risen each year. It is also selling at a discount (.84%) on a relative PE to the market which, while not rare, is an opportunity in and of itself.

I will also point out that MLP's will be unaff...

2010-07-12T06:21:20.770-07:00

I will also point out that MLP's will be unaffected by tax changes since their dividends are taxed at the full income tax rate already. This may be a place where dividend investors choose to ride out any volatility caused by the sunset of Bush's tax cuts.