What Will Election’s Do For Dividend Stocks

I view any lasting loss of dividend stock valuations as highly unlikely. First, there was no surge in dividend stock values following the enactment of lower dividend tax rates back in 2003. Second, the majority of the float of dividend stocks is owned by institutions, which aren’t affected by changing tax rates. And much of the rest is held inside IRAs and other tax-deferred retirement accounts.

Even if dividends are fully taxed at the highest rate, dividend stocks are still the only game in town to generate the necessary income for retirement, as bond yields are at multi-decade lows and “savings” yields are almost nonexistent. Regardless of whether there will be higher tax rates, there are simply no alternatives. If there is a selloff due to higher tax rates, the resulting higher yields and more attractive valuations will soon lure new buyers, which will quickly erase any losses.

Source: Investing Daily

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