Dividend Stocks Will Shine In 2013

Higher taxes on dividends could lead investors to dump income stocks — right? Not necessarily, say some strategists. Depending on how Washington's fiscal cliff maneuvers turn out, the effective dividend tax rate could spike on Jan. 1 from 15% now to 44.6% for investors in the top bracket. But strategists give several reasons why dividend stocks could continue to show strength in 2013. They include how such equities have previously reacted to tax changes, the effect of tax-advantaged accounts and the lack of alternatives for investors.

Demand for dividend-paying stocks won't change much in 2013 due to higher taxes, according to Savita Subramanian, head of U.S. equity and quantitative strategy for Bank of America Merrill Lynch. She and her team have studied how dividend stocks performed when tax policy changed or seemed about to change, such as when President George W. Bush cut the dividend tax rate to 15% in 2003, or when the market previously feared a hike in 2010.

Source: Investors.com

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