Will the dividend tax increase?
In 2003, Bush signed into law a cut in the tax rate on ordinary dividends to 15% (down from 35%). In 2010, the law expires. What will happen? Todd Wenning and James Early at the Motley Fool are worried:
As you can see, JGTRRA’s lower tax saved dividend investors quite a bit of money in a short period of time ($225 for the Progress Energy investor!). Over 10 years or more, the difference in after-tax dollars would be even wider.
They point out that since the law went into effect, the number of stocks paying dividends increased dramatically, while the returns on those stocks continue to be above-average:
Companies that choose to pay dividends are often out ahead in terms of corporate responsibility — and stability. In fact, numerous academic studies have shown that dividend-paying stocks beat those that don’t pay out anything. So, politics or not, they’re a smart place to be.