Dividend Stocks Aren't Helped By Tax Bill

To make the cut onto the Standard & Poor’s Dividend Aristocrats Index a company has to have paid a dividend every year for at least 25 consecutive years. The index includes at least 40 stocks and is rebalanced every year in December. S&P reported that the Dividend Aristocrats posted an annualized dividend yield of 2.9% in 2009, compared with a yield of 2.01% for the S&P 500 Index. But MarketWatch notes that the Dividend Aristocrats gained an average of just $0.02 from late Monday to Wednesday’s close. That’s a gain of just 0.004%, compared with a gain of 0.4% in the S&P 500.

The proposed tax bill agreed to by President Obama and Republican legislators on Monday extends the 15% tax rate on dividends, but apparently that wasn’t enough to light a fire under the Aristocrats. The performance of individual companies gets part of the blame for the weak showing. The other part of the blame goes to the temporary nature of the tax deal. In two years, the dividend tax rate could change again. Uncertainty is the bane of a dividend investor’s life.

Source: WallSt.com

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