The Bullish Case for Dividend Stocks

Don't give up on dividends. The possibility of an increase in the tax on stock dividends next year will kick up a lot of dust in the next few months about the diminished value of these payouts in that scenario—and about the threat of share prices tumbling as dividend stocks fall out of favor. But a broader perspective is in order: Dividend-paying stocks have outperformed nondividend shares even when taxes were much higher. That suggests that any backlash now against dividend stocks could present a buying opportunity for income-oriented investors.

While a 43.4% dividend tax may look onerous, that would be the maximum rate for households earning more than $250,000 a year and single filers making more than $200,000. Most shareholders can expect a bill nowhere near that—if they even pay investment taxes. "There always seems to be this implication that everybody is going to pay the top marginal rates, and that's not true," says Josh Peters, editor of investment researcher Morningstar Inc.'s Dividend Investor newsletter.

Source: Wall Street Journal

Related Articles:
- 12 Dividend Stocks For A Powerful Income Stream
- 7 Dividend Stocks Sporting A Five-Star Rating
- 10 Dividend Stocks Ignoring The 4% Rule
- Dividend Stock Bubble: Is It Even Possible?
- 8 Dividend Stocks To Consider While Waiting on Apple to Pay Its First Dividend