Picking a dividend stock is more complicated than simply comparing the yields across a set of stocks:
I’ve also learned that a dividend payout doesn’t tell you a thing about a company on its own. A fat payout figure can even be a bad sign if it’s the result of a stock price that’s hit the skids, or if an examination of the company’s cash flows indicates that its payout is unsustainable.
If the Congress does not extend the Bush tax cuts, we may see a dramatic increase in taxes on dividends. For those holding dividends stocks before that happens, might be in for a treat:
With the deficit rising from 1% to 3% of GDP, a new Congress isn’t likely to wait for the Bush tax cuts to expire in 2010, Bohnsack said. His company expects Congress to roll back the tax cuts in 2009.
The Bush tax cuts slashed the individual tax on dividends from as much as 38.6% to 15%.
But there will be a sweetener before that happens, according to the Strategas Research scenario.
More companies will pay special dividends this year, Bohnsack said.
Companies have become “almost like checking accounts,” he said. They are flush with cash because money is not being deployed in this troubled atmosphere.