DIVIDENDS' DIRECTION

Physician's Money Digest, June30 2003, Volume 10, Issue 12

Now that Bush's plan to eliminatetaxes on dividends has succeeded,what will investors do?Some market mavens point out thatnot taxing dividends doesn't affectstocks or mutual funds held in atax-advantaged retirement account,which is exactly where they are forthe majority of investors. Those whohold dividend-paying stocks inIRAs or 401(k) accounts are taxedwhen they take money out, regardlessof whether any gains came fromdividends or from an increase instock prices. If investors figure all thisout and decide to trade dividend payingstocks for growth stocks intheir tax-deferred accounts, theresult could be a sell-off that wouldwipe out any tax break. Still, manysee the shift in emphasis to dividendsrather than growth in share price asa plus, which will make Enron-typeshenanigans less attractive.