how to record dividends paid
In a recent dividend study, Standard & Poors found that “dividend income as a percentage of personal income steadily increased from just 2.8 % in 1988, to 6.7% in 2007. During this period, interest income shrank by over 30%, to only 10.41% of personal income.
Personal dividend income will continue to increase in importance, generating even greater demand for income-producing stocks in the coming years, fueled by the increased numbers of investors owning equities, and by the coming surge in boomer retirees.
Unfortunately for us dividend yield seekers, our hunt for dividend income has become harder than ever in 2009, as record numbers of companies eliminate or drastically reduce their payouts in order to conserve cash, and sectors we once depended upon for income have imploded. Just when the retiring boomers need dividend income more than ever, the dynamics of this game have changed drastically, taking away some of the key players.
The financial sector used to account for more than 30% of the dividend payouts on the S&P, but now account for only 9.6%. All told, financials account for 31 of the 51 reductions and suspensions this year, and not one financial company remains in the S&P list of the top 25 dividend payers in 2009.
In fact, the ranks of dividend paying stocks have thinned out so dramatically that the top 28 dividend-paying stocks account for more than half of the dividends paid out in 2009.
Here’s a list of the top 5 dividend paying stocks for 2009, ranked by total cash payouts? It turns out that 3 of them are energy companies, 1 is a telecom, and 1 is a conglomerate:
1. Royal Dutch Shell (RDS-A, RDS-B) ? Pays out $9.8 billion/ year and currently yields 6.77%.
2. AT&T (T) – Is sporting a current dividend yield of 6.44%. Its $1.64/share annual dividend equals $9.6 billion a year paid to shareholders.
3. General Electric (GE) ?Even though GE cut its 3rd and 4th quarter dividend payouts from $.31 to $.10/share, it will still pay out $8.6 billion in 2009. GE?s $.82/share annual payout currently equals a 5.87% yield. GE?s shares have risen over 100% during the current rally.
4. Exxon Mobil (XOM) pays out $8.1 billion a year. The annual dividend rate for this company is $1.60 a share, for a 2.43% current yield.
5. Chevron Corp. (CVX), has an annual dividend/share of $2.60, which equals a total annual payout of $5.3 billion. The stock?s dividend yield is 3.82% at the current price.
Two themes, among many, that define these companies are their industry domination and their steady histories of paying dividends. Obviously, GE has had its problems with its lending arm during the downturn, so you’d have to decide if you think their mix of businesses can ride out these problems.
The 3 oil companies might cause some investors to debate whether oil is headed down further or back up, when the economy turns around. Judging by the way oil prices have moved up this week as “less than bad” economic news continues to come in, investors seem to be betting that oil will be going back up when things turn around.
So, what if you want the yields on some of these dividend stocks, but you’re afraid of another market pullback, or, you think the prices are too high?
There are 2 ways you can attack these problems, both of which I’ll discuss in Part 2 of this series.
About the Author:
Robert Hauver, MBA, publishes The Double Dividend Stock Alert a monthly investment newsletter which features strong dividend paying stocks, like the ones in this article, and shows investors how to protect and increase their yields on them. For proven high yield strategies, based on risk reduction and sound research, visit: www.DoubleDividendStocks.com
Article Source: ArticlesBase.com – The Top 5 Dividend Paying Stocks for 2009
Question: will i pay taxes by removing money from a merill lynch account if i have been paying dividends on it annually?
my dad set up an account and purchased some 0 coupon bonds in 1991, renewed them in 2001, sold them and had the money in a MMA ever since then. i am 25 and have only done my taxes for the last 3 years or so, but every year i record dividends from this merill lynch money (worth about $13,000 now). my dad just signed off the account to me in full so i have access to the funds and i plan to transfer that money out of that account to a fidelity account. so will i pay taxes by taking the money out of the cash account, or are the dividends i pay each year the only tax implications that i have with that account?
Answer: It sounds like the money is currently in a money market fund. There are usually no gains or losses on a money market fund, so when you sell it, and transfer to Fidelity, you will not owe any taxes, other than the taxes on the dividends that it paid so far this year.
When you had the zero coupon bonds, you paid a tax every year on the ‘accrued’ interest so when they came due, you did not owe any current tax (other than the current year’s OID interest).
I hope that helps.
I hope that helps.