Dividend Dynamos, With Or Without The Tax Break

he tax compromise reached between President Obama and Congressional Republicans has a number of key provisions, but one that should be of particular interest to investors is the extension of the cap on stock dividend taxes. By extending the 15% cap on qualified dividends for two more years, the proposal could mean a boost in some firms’ dividend payouts, and a boost for dividend-paying stocks.

Still, while dividend stocks may get a boost, the tax compromise isn’t a reason to start loading up haphazardly on high-dividend stocks. After all, a hefty 6% dividend payout is little consolation if a firm struggles and its share price tumbles 30%. If you’re going to try to take advantage of a potential dividend-stock bounce, you should be sure that the stocks you’re buying also have strong fundamentals and solid balance sheets.

Source: Forbes

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