NEW YORK, NY -- (Marketwire) -- 11/29/12 -- A dividend tax increase has been a major concern for investors as the upcoming fiscal cliff approaches. Major companies such as Las Vegas Sands and Wal-Mart have declared special dividends or have moved up quarterly dividend payments in attempts to avoid the looming tax increase. Five Star Equities examines the outlook for dividend yielding companies and provides equity research on Apollo Investment Corp. (NASDAQ: AINV) and Prospect Capital Corporation (NASDAQ: PSEC).
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U.S. investors are set to face a dividend tax increase in the New Year. The current top tax rate on dividends of 15%, which was set in the Bush-era, will expire in January. If lawmakers fail to take action dividends will be taxed at the same level as wages and salaries in 2013. President Obama's plan would see the top tax rate on dividends rise to 39.6 percent for high-income earners, which doesn't include the new 3.8 percent tax on investment income added by Obama's health-care law.
"The prevailing fear is that if taxes for dividends increase, dividend yielding companies could grow less attractive and could see a multiple de-rating," said Savita Subramanian, a strategist at Bank of America Merrill Lynch.
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Apollo Investment Corp. provides private debt market solutions to middle market companies in the form of senior secured, mezzanine and asset based loans and may also acquire equity interests. The company currently offers investors an annual dividend of $0.80 per share for a yield of approximately 9.85 percent. Shares of Apollo have gained over 25 percent year-to-date.
Prospect Capital Corp. is a leading provider of flexible private debt and equity capital to sponsor-owned and non-sponsor-owned middle-market companies in the United States and Canada. The company currently offers investors an annual dividend of $1.22 per share for a yield of approximately 11.55 percent. Shares of Prospect Capital have gained nearly 15 percent year-to-date.
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