February 11, 2005

Dividends (cont.)

More news regarding dividends. Just this past week 12 companies in the S&P 500 have raised their dividends, my clients own one of the companies.

Historically speaking, the S&P 500 is still way below its dividend yield average. Over the past 25 years there was a strong shift away from dividends because tax rules changed to favor capital gains. Now that dividends have a favorable tax status there is has been more interest in those type of stocks. Changes in tax laws can definitely cause a long-term shift in how people invest.

One important aspect to remember though is that the favorable status for dividends will expire at midnight on December 31, 2008. Then we go back to taxing dividends as regular income. Keep an eye on developments concerning making this permanent.

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