dividend tax increases: what should investors do with their dividend paying stocks?

Dividend Tax Increases What Should You do with Your Dividend Payers? An investor’s return on a dividend paying stock consists of two components, capital appreciation potential and dividend yield. The mix of these components can greatly effect the after-tax return of the investment. To the extent possible, investors should look to optimize asset location as a means of maximizing after-tax investment performance. Scheduled Changes to Dividend Tax Rates 15% to Ordinary Income ( 43.4% ) 0% to Ordinary Income ( 15.0% ) A Wealth of Intelligence Consider locating dividend paying stocks with high potential capital appreciation and low yield in taxable accounts. (Stock A) Consider locating dividend paying stocks with low potential capital appreciation and high yield in tax-deferred accounts. (Stock B) Potential Capital Appreciation- 2013 Dividend Yield - 2013 Tax Deferred Account Taxable Account Stock A Stock B *assumes 0% portfolio turnover rate with dividends taxed at maximum level of 43.4% Stock B 2% + 6% = 8% 5.4% Stock A 6% + 2% = 8% 7.1% Capital Appreciation Dividend Yield Pre-tax Return After-tax Return* The presented material is for educational purposes only. Due to various factors, including changing market conditions and/or applicable laws, the content presented may no longer be reflective of current opinions or positions. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended and/or undertaken by PWM Advisory Group, LLC [“PWM”]), or any investment- related consulting services, will be profitable, equal any corresponding indicated historical performance level(s), or prove successful. It remains your responsibility to advise PWM , in writing, if there are any changes in the your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising PWM's previous recommendations and/or services, or you would like to impose, add, or to modify any reasonable restrictions to PWM's services. A copy of PWM's current written disclosure statement discussing its advisory services and fees is available upon request. Please Note: PWM is not an accounting firm, and no portion of its services should be construed as accounting advice. WithumSmith+Brown, PC ("WS+B") is a co-founder and strategic partner for PWM. In the event that a client desires financial planning and/or accounting-related/tax preparation services, the client can engage WS+B to provide such services per the terms and conditions of a separate engagement agreement. Dividend Paying Stocks are not created equally. Asset Location Matters -NJ.com PWM Advisory Group, LLC. Copyright © PWM Advisory Group, LLC.

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Page 1: Dividend Tax Increases: What should investors do with their dividend paying stocks?

Dividend Tax IncreasesWhat Should You do with Your Dividend Payers?

An investor’s return on a dividend paying stock consists of two components, capital appreciation potential and dividend yield. The mix of these components can greatly effect the after-tax return of the investment.

To the extent possible, investors should look to optimize asset location as a means of maximizing after-tax investment performance.

Scheduled Changes to Dividend Tax Rates 15% to Ordinary Income ( 43.4% ) 0% to Ordinary Income ( 15.0% )

A Wealth of Intelligence

Consider locating dividend paying stocks with high potential capital appreciation and low yield in taxable accounts. (Stock A)

Consider locating dividend paying stocks with low potential capital appreciation and high yield in tax-deferred accounts. (Stock B)

Pote

ntia

l Cap

ital

ppre

ciat

ion-

201

Dividend Yield - 2013

Tax Deferred Account

Taxable AccountStock A

Stock B

*assumes 0% portfolio turnover rate with dividends taxed at maximum level of 43.4%

Stock B 2% + 6% = 8% 5.4%

Stock A 6% + 2% = 8% 7.1%

Capital Appreciation

Dividend Yield

Pre-tax Return

After-tax Return*

The presented material is for educational purposes only. Due to various factors, including changing market conditions and/or applicable laws, the content presented may no longer be reflective of current opinions or positions. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended and/or undertaken by PWM Advisory Group, LLC [“PWM”]), or any investment-related consulting services, will be profitable, equal any corresponding indicated historical performance level(s), or prove successful. It remains your responsibility to advise PWM , in writing, if there are any changes in the your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising PWM's previous recommendations and/or services, or you would like to impose, add, or to modify any reasonable restrictions to PWM's services. A copy of PWM's current written disclosure statement discussing its advisory services and fees is available upon request. Please Note: PWM is not an accounting firm, and no portion of its services should be construed as accounting advice. WithumSmith+Brown, PC ("WS+B") is a co-founder and strategic partner for PWM. In the event that a client desires financial planning and/or accounting-related/tax preparation services, the client can engage WS+B to provide such services per the terms and conditions of a separate engagement agreement.

Dividend Paying Stocks are not created equally.

Asset Location Matters

-NJ.com

PWM Advisory Group, LLC.

http://www.pwm-nj.com/

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