How secure are streams of dividend income? The question arouses anxiety throughout the year, and especially during the holidays. Throw in talk of a coming “fiscal cliff,” and it increases exponentially.
Fred Taylor says to relax—sort of.
“We’ve been talking about this literally since January,” says Taylor, president of and co-founder of Denver-based NorthStar Investment Advisors. “So our clients are probably immune to it.” Taylor, whose firm specializes in building dividend portfolios for income, adds that much of the country has been talking about it as well, at least since the debt ceiling debate in Washington during the summer of 2011.
“It’s one of the reasons we’re not seeing a massive correction in the market,” he explains. “Believe me, if we saw a 20% downward swing, our clients would be calling, but that’s not happening.”
Volatility is light, with the VIX at 16, and there hasn’t been much economic news to cause it to spike. “The market has already baked in the fiscal cliff headlines,” Taylor argues. “And from what we’re seeing, it believes we’ll get a deal done.”
The deal, he says, will involve higher tax rates on the wealthy coupled with some type of entitlement cuts. “My personal belief is that dividends and capital gains are not what really matter to Obama,” he says. “If we can get income tax rates back to where they were under Clinton at 39.6% then that’s what he’s really after. He’ll let the other stuff go.”