Dividends’ Unintended Consequences

Posted on December 7, 2012 | Investor Update

There are three unintended consequences on dividend stocks and dividend investors being caused by the uncertainty of 2013 tax rates. The consequences are an extraordinarily large number of special dividend declarations, the early payment of typical first-quarter dividends and the future adverse impact on dividend growth rates for certain companies. These unintended consequences are a subject we are discussing in the December AAII Dividend Investing monthly report, and I’ll share an overview about them here.

Howard Silverblatt, the senior index analyst at S&P Dow Jones Indices, counted special dividend (extraordinary distributions that will not be repeated in the future) declarations from 228 companies occurring last month. To put this number in perspective, total annual (not monthly, but annual) special dividend declarations have averaged 181 over the past eight years. Only 2007 saw more declarations than November 2012 (233 for all of 2007 versus 228 for November 2012).

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