The Dow Jones industrial averages have seesawed daily in recent weeks as investors react to every lawmaker’s comment. It’s all about the looming “fiscal cliff” and a fragile global economy. Stocks rise after politicians suggest they can reach a compromise, and then slump on indications that the Dec. 31 deadline to avoid automatic tax hikes and spending cuts will not be met.
The economic clouds are looking darker by the day for increased taxation. It’s at the point where investors must decide what to do with their equities and dividend-paying stocks.
Without any political action, dividends will rise from the 15 percent tax rate that began in 2003 to that of ordinary income that can reach 43.3 percent for top earners.
Several of the Town Crier “50” stocks pay good dividends, and I would evaluate them individually and retain high-quality, established companies that have a history of dividend increases and a good cash flow with a healthy balance sheet.
Several Town Crier stocks pay dividends, including Applied Materials, 3.5 percent yield; Cisco Systems, 3 percent; Hewlett-Packard, 4.3 percent; Intel, 4.5 percent; Intuit, 1.2 percent; KLA-Tencor, 3.6 percent; Microsoft, 3.4 percent; and Northern Trust, 2.5 percent.
Yields (annual dividend rate/share price) on many dividend-paying stocks are currently very attractive versus what investors can earn with alternative investments such as certificates of deposit or bonds.
Two companies on the Town Crier “50” made headlines recently.
• Microsoft Corp. (MSFT; $26.48) is desperate to gain a toehold in the mobile market, while some of its users are slashing prices on the Windows Phone 8 model to increase market share. Microsoft is now deploying a second strategy to tap into the mobile market. It plans to raise licensing fees on businesses that allow employees to access company software from mobile devices. Microsoft is working on a new version of Office suites for Apple and Android tablets.
The latest version of Microsoft’s Windows 8 has failed to give the PC market a much-needed lift. Although still early, Windows 8 has not provided the impetus for sales that the company projected. PCs are primarily used in office production work that hasn’t expanded, so why buy a new PC just for the operating system when the old one performs faithfully?
Microsoft Nov. 28 declared a quarterly dividend of 23 cents per share, payable March 14 to shareholders of record Feb 21. Analysts still consider Microsoft a current Buy and a long-term Hold.
• Cisco Systems Inc. (CSCO; $19.06) jumped further into cloud computing with three acquisitions in November. Cisco announced its plan to purchase Cariden Technologies for $141 million. Last month Cisco purchased Meraki for $1.2 billion and Cloupia for $125 million as part of its cloud and networking expansion strategy. These deals will enable telecom service providers to expand their offerings to networking infrastructure.
Cisco was the best-performing company on the Dow industrials in November. Analysts at Raymond James Financial noticed and immediately forecast Cisco to trade at $25 next year and possibly reach as high as $60. Cisco is rated a Buy and a long-term Hold.