Worries Over Likely Dividend Tax Increase

For more than 50 years, Mad magazine's red-headed mascot, Alfred E. Neuman, has enjoyed iconic status and his own signature saying: "What, me worry?" While many people are fretting over the harmful possibilities of our looming fiscal crash, there are those who are taking the other side of that fear trade and embracing a more Neuman-esque approach, particularly as it pertains to possible changes to the tax code and to dividends. "I think dividend stocks are not as expensive as some are making them out to be," says Jeremy Schwartz, the Director of Research at WisdomTree. He admits that a lot people are not only afraid of facing higher taxes on their dividends, but they are also worried that the broader markets could get caught up in any retreat.

However, he says there are a lot of mitigating factors that will lessen the impact and keep declines in check. "Not everyone is going to face the [tax] increase," Schwartz says, citing research that shows only half of dividends went to households making more than $250,000 a year, and then a large portion of these people have their yield plays in tax-insensitive or tax-advantaged accounts, such as an IRA or some other form of pension fund.

Source: Yahoo Finance

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