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Private Briefingwith WILLIAM PATALON III, Executive Editor
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One reason investors are scared silly over fiscal cliff 2013 is the potential tax hike that will affect investing in dividend-paying stocks.
If Congress doesn't act the rate on dividends will revert to the ordinary income rate, which tops out at 39.6%, after it was lowered to 15% during the George W. Bush administration.
"It's a foregone conclusion the rates are going up -- it's just a matter of how high they go," Todd Lowenstein, a money manager with HighMark Capital Management Inc. told Bloomberg News.
But history shows dumping dividend-paying stocks because of higher tax rates is a losing game.
Even if tax rates go up, investors will fatten their wallets on companies that raise dividends because the money compounds over time, essentially paying interest on the interest.
And right now, there are plenty of good reasons for corporations to reward investors with higher payouts.
Companies are sitting on $3 trillion of cash and can create badly needed goodwill by showing they're attuned to investor concerns about higher taxes, according to HighMark's Lowenstein.
Plus, if corporate tax rates climb, companies may want to increase their dividend payouts instead of paying more taxes on interest from that cash.
And it's about time, based on the miserly way companies have been treating investors.
Companies in the S&P 500 paid a paltry 27% of earnings to investors in dividends last year, according to research from Goldman Sachs Group Inc(NYSE: GS). Over the past 50 years, the payout ratio has rarely dropped below 40%.
In fact, the best companies are committed to boosting their dividends in even the worst economic times. Many of them are so predictable that you can narrow it down to the very day they'll pay dividends and, in some cases, even the size of the increase.
Here are three companies with long track records that will almost certainly raise their dividends in the near future:
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