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jenksjr
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Born and raised in Arizona. Joined Air Force in the waning days of Vietnam War. Served 8 1/2 years stateside and in Alaska as a Radar and Satellite tracking technician. Afterward, I worked in the semi-conductor industry and computer maintenance industry for a short time. Later, I did some... More
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  • My Top 10 Dividend Growth Stocks On The Watch List.

    I'm looking to buy these stocks soon. These stocks are specifically slated to go into my Taxable account. I will be adding one to two of this each week over course of the next ten weeks.

    I already own 28 positions in this account, but need to replace a few of them to reduce my non-qualified dividends.

    I have culled these stocks from the CCC list. I mainly am looking for stocks that will produce a better than a 10% dividend at the end of a 10 year period. The 10 year divies are based on an initial investment of $5000.

    The DGR is not necessarily based on a 5 year period. I analyze the 1, 3, 5 year DGR's and determine which one I believe represents the most reasonable rate going forward. For example, if the 5yr DGR is 25% and the 1 year DGR is 10% I may use the 1 yr DGR to be conservative. Also, I use at least two sources to compute the DGR. I don't take reported DGR's for granted and neither should you!

    SymbolYLDDGR10 yrs DiviesEnd YOC
    ESV5.63%25.0%$9,35941.90%
    CBRL3.95%25.0%$6,75930.90%
    TUP3.28%24.5%$5,18322.70%
    OKE3.19%20.4%$4,24617.00%
    OMC2.40%20.0%$3,68814.70%
    HMN3.04%18.0%$3,57413.50%
    PFG2.60%20.0%$3,36913.40%
    LMT3.24%16.0%$3,45712.30%
    WEC3.46%14.7%$3,46211.90%

    Disclosure: The author is long ESV, CBRL, TGT, WEC.

    Jun 17 8:01 PM | Link | 4 Comments
  • Income Tax Issues Facing Dividend Growth Investors: Part 2

    If you happen to be like me you are retired and living off your savings that you built up in working years. And some of you may have, not only an IRA, but also a taxable investment account. If that's true then this article is for you. I have been doing research into how IRS rules can affect your income from your taxable account. I wrote a previous article that dealt with income derived from dividend paying stocks, ETF's mutual funds and the like. You can find that article directly below this one.

    In the rest of this article I will refer to stocks, ETF's, mutual funds and the like as Investment Property.

    In this segment I want to discuss issues Dividend Growth Investors are faced with when dealing with Capital Gains and Losses. Income from capital gains are derived from sales of Investment Property that is sold at higher price than when purchased. And conversely, Capital losses are incurred when Investment Property is sold for a lower price than when purchased. The IRS has a set of special rules that apply to these gains and losses. If you do any buying or selling of Investment Property you would do well to get a copy of IRS Publication 550. A good understanding of this subject will help you lower your tax bill.

    One of the most important aspects of buying and selling Investment Property concerns the holding period. The holding period determines whether any capital gain or loss was a short-term or a long-term capital gain. If you bought investment property and hold it for more than 1 year, any realized gain or loss will be considered a long-term gain or loss. Conversely, if you held the property for less than 1 year, any gain or loss will be considered a short-term gain or loss.

    One thing you must understand about the holding period for Investment Property, the clock starts ticking the day after you make your purchase. So, make sure before you sell any property that 1 year has passed from the day after the purchase. Let's say you bought Investment Property on February 6, 2012. You would need to sell that property on or after February 7, 2013 for your holding period to be at least 1 year.

    Why is the holding period so important? Because, long-term gains, tax wise, are treated more favorably than short-term gains. The tax rates on short-term gains can range from 10% to as high as 39.6%. If you can keep your capital gains long-term you pay as little as 0.0% to 20% tax rate. You can see that keeping your capital gains long-term could make a tremendous different in your tax bill.

    One way to take full advantage of these rules is to make sure your "net capital gains" are always long-term. This, basically, means, if possible, to keep your short-term sales on the loss side and your long-term sales on the plus side.

    Also, if you can keep your taxable income below $73,800 (if married) you will pay zero tax on your long-term capital gains. Compare that to a 15% tax rate if your gains are short-term. If your taxable income is less than $457,600 (if married) your long-term gains would only be taxed at 15%. With short-term gains you would be paying at a 35% tax rate.

    If you happen to have a net capital loss it can be used to offset your some of your other income. There is a yearly limit $3000 that can be used to reduce your income dollar for dollar. If you have losses greater than $3000 you can carry over the unused part to next year and treat it as if you had incurred it in that next year.

    This article certainly can't cover all the ins and outs of the capital gain or loss rules. It will be up to you to study the subject and then analyze your own situation. You than should be able come up with a strategy that will lessen your tax bill before next April 15th. Always if you have questions and no answers seek out a professional tax accountant or CPA.

    Jun 09 5:51 PM | Link | Comment!
  • Income Tax Issues Facing Dividend Growth Investors: Part 1

    Occasionally, I run into comments on SA that are dealing with income tax issues. It seems at times there are endless arguments concerning how much folks in the U.S. are taxed on capital gains, foreign taxes, dividend income, social security taxes and etc. I am no tax expert, but I do know how to read. You only need to consult the proper IRS publication to get an explanation regarding the particular subject.

    In the case of Investment Income and Expenses you should check out IRS Publication 550. This publication gives you help in figuring your Capital Gains and Losses. Also it will answer the questions of how much tax you will owe on your Capital Gains, Interest Income, and Dividend Income. Of course, none of this applies to you if you hold all your stocks in IRA's, 401k's and the like.

    While reviewing the above publication I ran into some very interesting information regarding Dividend Income taxes that should be of great interest to us Dividend Growth Investors. On page 20 you will find the following information.

    "The maximum rate of tax on qualified dividends is:

    · 0% on any amount that otherwise would be taxed at the 10% or 15% rate."

    Did you get that? No tax on "qualified dividends" if your marginal tax rate is 15% or less. So, keep your tax rate in the 15% bracket or less and there is no tax on your qualified dividends. You are probably now interested in knowing what constitutes a "qualified dividend" and where does the 15% bracket end.

    For a stock to qualify for "qualified" status it must meet two criteria. First, the dividends must be paid by a U.S. Corporation (with some exceptions) and certain foreign corporations. Secondly, there is a required holding period.

    Dividends that are not qualified are from corporations that are tax exempt. This would include dividends from Real Estate Investment Trusts (REIT's). Also, during tax season your dividends must show up on a 1099-DIV with the qualified amount shown in box 1b.

    Remember there is also a holding period that must be observed in order for your dividends to receive qualified status. For ordinary stocks the holding period is 60 days during the 121 day period that begins 60 days before the ex-dividend date. The publication gives you plenty of examples on how this works. In the case of preferred stock you must have held the stock for more than 90 days during the 181 day period that begins 90 days before the ex-dividend date. If you are a long term investor you shouldn't have any trouble with these holding periods.

    Now, how do I know if I'm in the 15% tax bracket or less? You will need to check out the 2014 Tax Rate Schedules to get an idea into which tax bracket you fall into. So, if you are married and filling jointly look at Tax Schedule Y-1. The first column heading reads "If your taxable income is: Over -". Underneath you will find dollar figures ranging from Zero to 457,600. Find the figure 18,150 then look across the table to the 3rd column to find the figures 1815 + 15%. In column four you will find a dollar figure of 18,150. This indicates that you will pay 15% tax on every dollar you make over $18,150 up to the next bracket of $73,800. Bottom line if your taxable income is less than $73,800 you will not be liable for taxes on your qualified dividends.

    Here's a simple example how this might work for a married couple filing jointly with an earned income of $40,000 and qualified dividends of $10,000. Their standard deduction would be $12,400 and their personal exemptions would equal $7900. Subtract these from $40,000 and you are left with $19,700 taxable income. Their tax would look like this.

    10% of $18,150 = $1815

    15% of $ 1550 = $ 233

    0% of $10,000 = $ 0

    Total Tax = $2047

    If their dividends had not been "qualified dividends" this imaginary couple would have paid an additional $1500 in taxes.

    So check your portfolio to make sure you are taking advantage of qualified dividends and then ensure you are properly filing your tax return to take advantage of this special part of the tax code. Also, go to the nearest IRS office and pick up your own copy of Publication 550 and check it out for yourself.

    In my next segment I will write about how we can lessen the tax bite on our capital gains.

    May 13 11:24 PM | Link | Comment!
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    Aug 5, 2014
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