Higher Tax Rates Could Mean Special Dividends for Investors

As the end of 2010 is fast approaching, it appears Congress is having difficulty deciding how to handle the expiration of the Bush era tax cuts. If the Bush era tax structure expires, a whole host of tax increases will be thrust upon nearly all taxpayers. One tax that will be impacted is the tax rate on dividends, which will increase.From a performance perspective, higher taxes on dividends does not necessarily translate into the stocks of dividend payers underperforming the non payers. A recent Reuters article, Tax Changes Won't Kill Dividend Trend, highlights where Allianz reviewed tax rates from 1972 to the present, identified nine distinct time 'regimes', and found dividend-paying stocks outperformed nondividend-paying stocks in all but one period: 1987 (see below chart.)... Read more