NEW YORK, NY -- (Marketwire) -- 12/06/12 -- 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. According to Bloomberg, from the end of September to mid-November 59 companies in the Russell 3000 stock index have paid special dividends, compared to just 15 one year-ago. Five Star Equities examines the outlook for dividend yielding companies and provides equity research on Kinder Morgan Inc. (NYSE: KMI) and Waste Management, Inc. (NYSE: WM).
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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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Kinder Morgan is the largest midstream and the third largest energy company in North America with a combined enterprise value of approximately $100 billion. The company currently offers investors an annual dividend of $1.44 per share for a dividend yield of approximately 4.25 percent. Shares of Kinder Morgan have gained nearly 5 percent year-to-date.
Waste Management is the leading provider of comprehensive waste management services in North America. The company currently offers investors an annual dividend of $1.42 per share for a dividend yield of approximately 4.35 percent. Analysts at Goldman Sachs have recently upgraded the company's rating to a "buy" and raised their price target from $33 to $42.
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