Tags: dividend | stocks | fiscal | cliff

How to Combat Fiscal Cliff? Dividend Stocks, Some Say

Friday, 19 Oct 2012 09:31 AM

By Dan Weil

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Dividend stocks represent a solid investment choice with the fiscal cliff, which includes automatic tax hikes, looming on the horizon, some financial advisers say.

One is Barbara Reinhard, chief investment strategist at Credit Suisse Private Bank. She sees two factors arguing in favor of dividend stocks, according to The New York Times.

First, the price-earnings ratios of dividend stocks are below their historical norms. And second, companies raising their dividends now have solid, diversified balance sheets, which should buoy them in case of a fiscal crisis.

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

If Congress and the White House do nothing, the top dividend tax rate will soar to 39.6 percent, plus a 3.8 percent Medicare surtax for high-income earners, as of Jan. 1 from 15 percent currently.

Reinhard is not concerned about the expected increase for most investors, but others are worried.

“That’s a big difference,” Rex Macey, chief investment officer of Wilmington Trust, tells The Times. “But we’ll know early enough next year, maybe after one or two dividend payments, what’s going to happen, so we’d rather wait.”

MarketWatch columnist Meena Krishnamsetty lists five stocks that offer attractive dividend yields, haven’t fallen in price this year and have seen at least one significant insider purchase.

Her list includes:

• Old Republic International (ORI), an insurance company that has a 6.6 percent yield;

• AT&T (T), which has a yield of 4.9 percent;

• Integrys Energy Group (TEG), a utility that has a yield of 4.9 percent;

• DTE Energy (DTE), another utility, with a yield of 4 percent;

• Alliant Energy (LNT), yet another utility, with a yield of 4 percent.

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

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