Dividend Stocks Risk A Drop

The darlings of cautious investors are sitting on the edge of the "fiscal cliff" and feeling twinges of tax anxiety. Much to the surprise of some investors, dividend-paying stocks — sleepy investments like utilities — along with real estate investment trusts, and master limited partnerships, all have dropped in value since the presidential election. Nervous investors fear that all three could face higher taxes next year, and some have been selling high-yielding investments rather than wait for them to decline in value amid tax concerns later.

Analysts say that after going through initial selling, dividend stocks should still be attractive to investors because many retirees won't be in the upper income bracket, will want income for retirement expenses and will prefer the stability that solid dividend-paying stocks tend to offer over more volatile stocks. Although wealthy people would face the 43.4 percent tax rate, middle-income earners in the 28 percent income-tax bracket would only face dividend taxes at the 28 percent rate. And people who hold dividend-paying stocks in IRAs or 401(k) plans face no tax on those because the accounts are insulated from taxes.

Source: Naples News

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