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Are Dividends Good Enough For You?

1944 Lincoln Wheat Ears Cent.
Image via Wikipedia

Some people dislike things because they just aren’t cool any longer.  Remember the walk-man cassette players, then the portable CD players, and now the mp3 players?  What about the cellular phones in a briefcase, then flip phones, and now mini computers that you sometimes talk into?

Have dividends become so unattractive in today’s shorts, calls, puts, futures, derivatives driven market that people are almost embarrassed to admit that they invest in something for the sole reason of the dividend?  If you are one of these people then let me see if I can change your mind.

Reason #1 The Walton’s

According to a recent MSNBC article, the 3 Walton kids have netted about 1.2 billion dollars in dividends.  That is $1,200,000,000.00 for anyone who likes to see zeros.  For the more visual people, here is what 1 billion dollars would look like to you and me (from PageTutor.com):

1 Billion Dollars

That’s not a bad payday for annual dividends is it?

Reason #2 Warren Buffett

I couldn’t find any solid numbers, but what I do know is that Warren Buffett is invested in Coca Cola, Johnson and Johnson, Procter and Gamble, Wal-Mart, ConocoPhillips, and a few other stocks found on the Dividend Aristocrats Index.  This is by no accident.  Warren Buffett’s stake in Johnson and Johnson alone currently pays out $51,624,000.00 each year!  According to our calculations and a few estimations, his portfolio currently yields over $1.1 billion in annual dividends!

Reason #3 Tax Treatment

Currently, if you are in the 10%-15% tax brackets then you get your qualified dividend income tax free! This is due to what many call the “Bush Tax Cuts.”  These are set to expire at the end of 2010, but there appears to be a lot of bipartisan support for extending them a few more years, and even some talk about extending them permanently.  Now, that’s all fine and well for people in the 10%-15% brackets, but what about the higher brackets?  Well, anyone outside of the 10%-15% brackets was capped at 15%, and that’s not a bad deal at all!

Now, if you are interested because of the tax advantage, then you will want to watch what happens carefully over this coming year because it will make a huge difference to you.  It’s possible that these tax advantages could be extended or made permanent.  If you’ve ever been frustrated to see how much money is being taken out of your paycheck, then tax-free dividend income may be just what you need.

This article is a part of our free Stocks that Pay Dividends Training Course. Check it out now!

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