Why Dividends Will Keep Climbing

With all the talk about the possibility that our dysfunctional government will lead us all over the “fiscal cliff,” a big question for investors, particularly those heading into or already in retirement, is what might be on the horizon for dividend policy. A return to higher dividend (and capital gains) taxes will surely be on the table if Obama wins the election. And while Romney may strike a defiant pose against any changes, the final congressional makeup will have a lot to do with what plays out.

Still, I expect across-the-board dividend increases to continue no matter who wins and what the policy is. Here are three reasons why: 1) Lagging Stock Prices: When those stocks that soared start to head back down to earth, investors will clamor for more dividends to cushion the blow and generate cash. 2) Tax Policy: I can’t imagine a scenario in which everyone agrees that wholesale increases above a 20% tax is the way to go. 3) Executive Compensation: Remember that many corporate executives, in addition to the rest of us, collect dividends on corporate stock.

Source: InvestorPlace

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