NEW YORK, NY -- (Marketwire) -- 11/30/12 -- A dividend tax increase has been a major concern for investors as the upcoming fiscal cliff approaches. Major companies such as Las Vegas Sands and Wal-Mart have declared special dividends or have moved up quarterly dividend payments in attempts to avoid the looming tax increase. Five Star Equities examines the outlook for dividend yielding companies and provides equity research on General Electric Company (NYSE: GE) and 3M Co. (NYSE: MMM).
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U.S. investors are set to face a dividend tax increase in the New Year. The current top tax rate on dividends of 15%, which was set in the Bush-era, will expire in January. If lawmakers fail to take action dividends will be taxed at the same level as wages and salaries in 2013. President Obama's plan would see the top tax rate on dividends rise to 39.6 percent for high-income earners, which doesn't include the new 3.8 percent tax on investment income added by Obama's health-care law.
"The prevailing fear is that if taxes for dividends increase, dividend yielding companies could grow less attractive and could see a multiple de-rating," said Savita Subramanian, a strategist at Bank of America Merrill Lynch.
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General Electric currently offers investors an annual dividend of $0.68 per share for a yield of approximately 3.22 percent. The company reported total revenues increased 3 percent to $36.3 billion in the third quarter of 2012. Shares of General Electric have gained nearly 20 percent year-to-date.
3M currently offers investors an annual dividend of $2.36 per share for a dividend yield of approximately 2.6 percent. The company has recently completed its $847 million acquisition of Ceradyne. The combination of Ceradyne and 3M will enable new technologies and innovation for uniquely tailored materials requiring advanced ceramics.
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