Newest Threat to Dividend Stocks

Dividend stocks have never been more popular. With interest rates on most competing investments at rock-bottom levels, dividend yields remain attractively high -- almost unimaginably high in many cases. Regardless of whether it's a smart move from a risk perspective, investing in dividend-paying stocks is probably the only thing giving many investors the income they need from their hard-earned nest eggs.

That could all change, though. With the new proposed federal budget, a much larger tax penalty for dividends could push the pendulum back toward alternative methods of returning capital to shareholders -- methods that haven't worked nearly as well historically. It's not just taxpayers that are fighting the new proposed dividend tax rates. Many high-profile companies are also backing opposition as part of more general concern about the uncompetitive state of U.S. taxation on businesses compared to other nations.

Source: Motley Fool

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