Higher Taxes Won't Sink Dividend Stocks

Never has there been more uncertainty about taxes than there is today. With taxes of all sorts and sizes slated to rise in less than four months, some investors seem to be on the verge of panic about how to respond to whatever the future may bring. But a more measured approach to adjusting your portfolio for possible tax hikes will serve you much better than just reflexively making major changes to your entire investment strategy.

Some conclude that despite the advantages of strong dividend stocks, a massive move by investors out of them could push their prices lower. Yet there are several reasons to believe that dividend stocks won't be as sensitive to tax-rate changes as many fear. First, if you're like many people, you already hold dividend stocks in a tax-favored account like an IRA to shelter their income from taxation entirely. Second, many companies don't qualify for preferential treatment on their dividends, so their shareholders already pay ordinary rates on the income.

Source: Motley Fool

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