August 23, 2010
– Comments (6)
At the rates things are going it looks like Obama will probably do away with dividend tax advantages since they mostly help the rich. Any short plans for year end on dividend payers?
Just a quick thought, will probably expand later
All signals sent so far indicate they are favoring keeping the tax advantage for dividends for at least the next two years, but it may be limited to those making $250K or less. Geithner was the first to publicly advocate for it, IIRC, but I've heard pretty positive reinforcements from the administration. Remains to be seen, but this might work out alright for the retail investor.
If dividend stocks fall I am buying. I would stay away from shorting because you are paying while you wait for the tax cut removal (if you short a stock you have to pay it's dividend), and besides playing politicis is always a risky game.
Yeah you do have to pay the dividend, but the stock falls by the same amount that you paid out, so it shouldnt be much of a difference.
Also, I am not talking about shorting COP, JNJ, VZ, PG, ABT etc...I mean companies with a 5-6% yield that arent great already that people love because of the dividend
it falls initially, but the beauty of dividend stocks is that they usually come back up in the following week.
Personally I am far more scared of shorting anything with a higher yield than a lower one because:
1) high yield stocks will perform better in questionalbe markets than the average
2) I have to pay a higher dividend
I can show you a whole bunch of high yielders that have capital loss greater than the dividend. and then when the dividend is cut they plummet more. and im talking about like a 2 week play on this later this year, nothing too long