Is the Fiscal Cliff Bill Good for Dividend Stocks?
Here are some key highlights of the bill:
I. Bush tax cuts preserved for individuals who earn up to $400,000 and couples who earn up to $450,000.
II. Individuals who earn more than $400,000 and couples who make more than $450,000 will see:
* Tax rates increase from 35% to 39.6%
* Capital gains and dividend tax rate rises to 20% from 15%
* Health care reform will levy a new surtax of 3.8% on capital gains and dividends
III. Permanently addresses the alternative minimum tax and indexes it for inflation.
IV. Allows a 2-percentage-point cut in the payroll tax first enacted two years ago to lapse, which restores the payroll tax to 6.2%
V. Delays for two months $109 billion worth of across-the-board spending cuts
What's a bill without pork? According to U.S. News and World Report, the fiscal cliff bill has more than its share, including:
- Rum Producers: $13 per gallon kickback has been extended
- Electric Scooter Riders: 10% of cost of vehicle, up to $2,500 tax credit
- Hollywood: TV and movie makers can gross $15 million in breaks
- Motorsport Race Track Owners: can deduct more than $40 billion a year
- Algae and Asparagus Growers: $59 million to find a way to produce a biofuel
Overall, the bill should instill confidence in companies to raise their dividend. Below is one of the first to do so:
Sovran Self Storage Inc. operates as a real estate investment trust (REIT) and engages in the acquisition, ownership and management of self-storage properties. Jan. 2 the company increased its quarterly dividend 6.7% to $0.48 per share. The dividend is payable Jan. 28, 2013 to Shareholders of record on Jan. 14, 2013. The yield based on the new payout is 3.0%.
Selecting stocks with increasing dividends is critical for an income growth strategy. The above list contains stocks that recently raised their dividends; it is not a list of recommend buys. As always, due diligence should be performed before buying or selling any stock. For a list of stocks with a long string of consecutive cash dividend increases, see this list.
Full Disclosure: No position in the aforementioned stocks. See a list of all my dividend growth holdings here.
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