Are Dividend Rates About to Drop 29%?

So for every one dollar in dividend income an investor earned before they got to keep 85 cents worth after taxes. Upper bracket tax payers will only be able to keep 60.4 cents if the tax relief provisions expire. That is equivalent to a 29% drop in the dividend rate! If the dividend is going to drop, the value of the stock could also drop, as the stock is less desirable for investors to hold.

Obviously this is likely to affect the companies that pay the largest dividends the most. Here a few of the big ones.

• AT&T (T) has a 6.9% dividend yield.
• Pfizer (PFE) has a 5% dividend yield.
• Vodaphone (VOD) has a 5.7% dividend yield.
• Glaxosmithkline (GSK) has a 5.7% dividend yield.
• Verizon (VZ) has a 6.7% dividend yield.
• Bristol Myers (BMY) has a 5.1% dividend yield.
• Altria Group (MO) has a 6.9% dividend yield.
• Eli Lilly (LLY) has a 5.9% dividend yield.
• Consolidated Edison (ED) has a 5.5% dividend yield.
• Progress Energy (PGN) has a 6.3% dividend yield.
• Qwest Communications (Q) has a 6.1% dividend yield.
• New York Community Bancorp (NYB) has a 6.4% dividend yield.
• Pepco Holdings (POM) has a 6.9% dividend yield.
• Teco Energy (TE) has a 5.4% dividend yield.
• Philip Morris International (PM) has a 4.9% dividend yield.
• Nokia (NOK) pays a 4.9% dividend yield.
• DuPont (DD) has a 4.7% dividend yield.

Although Obama campaigned against the tax cuts t,here is a chance that he could extend them. Obama's budget seems to indicate that he would prefer to let the dividend tax rate rise to 20%. But at this point no one knows what is really going to happen.