Will Dividend Stocks Fall Off The Fiscal Cliff?

January 1 is months away yet the sound bites warning investors to sell out of dividend-paying stocks prior to their supposed implosion are numerous. The impending fiscal cliff may or may not become a reality but the sense of doom is driven by the fear that dividends will become taxable at much higher rates. It is as if these once beloved holdings have suddenly lost all the characteristics that make them attractive, solid companies and good investments. Will higher taxes on their dividends cause these investments to be toxic?

I have sent my clients statistics such as those Mark Miller points out in his great Retirement Revised article. But I couldn’t just tell them that their taxes are going up and to get over it. After all, for those in the top tax bracket, the tax would increase by a whopping 24.6%. I needed to reassure them that while this added tax cost is a burden to those owning dividend paying stocks, it is not, in fact, a deal breaker.

Source: Forbes

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