US Dividend Tax Break Less Than Straightforward, Bear Stearns Study Shows

by Carla Johnson, Investors Offshore.com

29 January 2003

According to a report from the Bloomberg news service, due to a provision contained within President Bush's dividend tax break which stipulates that in order for a company's dividend to be tax free, the payout must come from profit upon which federal income tax was paid two years ago, many companies will not be able to make tax free payouts to shareholders, even if the President's proposal becomes law.

Citing the results of a Bear Stearns & Co study, Bloomberg revealed that only 11 of the 30 members of the Dow Jones Industrial Average can offer dividend payouts free from tax this year.

According to the study: 'Those that can't include four of the five members whose dividends are highest by comparison with their share price: JP Morgan Chase & Co, Eastman Kodak Co, General Motors Corp and SBC Communications Inc.'

The Bear Stearns survey also revealed that in any event, there is likely to be a lag time while investors wait to find out how much of their dividends qualify under the President's plan, which could mean that investors experience difficulty in timing the purchase and sale of dividend-paying stocks.

http://quote.bloomberg.com/fgcgi.cgi?ptitle=Top%20Financial%20News&T=markets_box.ht&middle=ad_frame2_all&s=APjYOZRXaRG93IFN0

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