The prospects of new tax laws may blunt the general appeal for dividend stocks in 2013. Let’s face it: the odds are increasing that stock dividends will be taxed at a higher rate than the current 15%. The tax on stock dividends could approach ordinary income rates—just like current tax rates on bond coupons. But don’t despair income investors. Did you know that there are actually stocks with dividend yields much greater than their bond yields? This phenomenon is rare, because most times a company’s bond yield is much greater than its stock dividend yield.
Even if we hike dividend tax rates to ordinary income rates, some high dividend stocks will still be attractive compared to their bonds. They will still pay higher rates. And you have the added potential of stock appreciation, which is absent with the bonds. So let the fiscal cliff debate rage on. Here are three stocks for an income portfolio that will still look good no matter what that tax rate will be next year: ConocoPhillips (COP), People’s United Financial (PBCT) and Philip Morris International (PM).
Source: Forbes
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