Benefits to Investors

How can these changes benefit investors investing in dividends?

Below are the benefits to investors.

1. It may be a good time to take gains.

With the top capital gains rate now at 15 percent, the time may be right to harvest some gains on long-term holdings.

2. Universe of stocks is growing.

For funds that are required by prospectus to invest in dividend-paying stocks, the increasing number of companies paying dividends affords them more flexibility.

They now have a larger universe from which to select potential investments.

3. Potentially higher rates of income.

Corporations, particularly those with large cash flows, now have an added incentive to distribute cash to investors in the form of dividends.

Many companies have already increased their dividends, and many more may follow suit.

4. Dividend-paying securities make sense outside a retirement account.

Before the tax cuts, it made sense to hold dividend paying stocks and mutual funds in tax-sheltered accounts because the dividends were taxed as ordinary income.

With the tax cuts, however, capital gains no longer have the tax edge over dividends.