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Here's Why The Fiscal Cliff Deal is Great News For Dividend Stocks

I wish I had a nickel for every scary story I read about dividend stocks and the fiscal cliff over the last four months.

But a funny thing happened on the way to this great apocalypse...

Dividend stocks are not only alive and well, but stronger than ever.

For most dividend investors, the only real difference is that these tax rates are permanent - there's no 10-year horizon, as there was with the previous 15% dividend tax rate. So investment planning just got a bit easier.

The bottom line: There are now three good reasons why dividend stocks are irresistible...

What the Fiscal Cliff Deal Means for Investing in 2013

Stock markets surged on the first day of trading following the scaled-down fiscal cliff deal, but if there was ever a "Band-Aid" fix, this is it. That's because the deal failed to address three key financial problems. The debt ceiling, the automatic spending cuts, and an expired budget are all still issues that need to […]

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Stock Market Today: Fiscal Cliff Deal Leads to Rally

Passage of a congressional measure to avert the fiscal cliff gave a big boost to the U.S. stock market today (Wednesday), the first trading day of 2013.

Right out of the gate, all three major indexes jumped. Just before 2 p.m., the Dow Jones Industrial Average had climbed 232 points. The Standard & Poor's 500 Index jumped 25 points, and the Nasdaq rose 70 as markets cheered the news.

"We are happy that we are halfway home to fixing the fiscal cliff; we figured out the revenue side and delayed the spending side," Art Hogan, market strategist at Lazard Capital Markets LLC, told MarketWatch.

The rally followed a late surge Monday, New Year's Eve, when word emerged from Capitol Hill that progress had been made in the fiscal cliff talks, sending the Dow up 166 points by the session's close.

For 2012, the Dow added 7.3%, ending at 13,104.14. The S&P gained 13.4% to finish the year at 1,426.19, and the tech heavy Nasdaq added 15.9% to end 2012 at 3,019.51.

The rally in the stock market today came as investors breathed a sigh of relief that at least a partial deal had been reached.

"What's been hanging over the markets for the last couple of months has finally been released. The rally today (Wednesday) is 100% about the end of the fiscal cliff, and people are buying with both hands," Sean Kelly, a managing director at Knight Capital Group, told CNN Money.

But many analysts cautioned that gains in the stock market today were nothing more than a rally based on relief over the fiscal cliff deal and said the gains may be short-lived.

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What the Fiscal Cliff Deal Could Cost You

A fiscal cliff deal sailed through the Democrat-controlled Senate late in the night on New Year's Eve in an 89-8 vote.

The proposed deal then headed to the Republican-controlled House on New Year's Day, expected to meet at least some opposition from a party that has lobbied during most of the fiscal cliff negations for no tax increases at all. It went through with a 257 - 167 House vote.

At the deal's forefront was maintaining tax cuts for singles earning less than $400,000 and couples earning less than $450,000. The tax increase marks the first time in two decades that rates will rise for the wealthiest Americans.

While it does save millions of middle-class taxpayers from increases, workers will still feel the pinch because the payroll tax holiday has expired.

Also saved were benefits for some two million unemployed workers who were on the brink of losing their federal checks.

The measure postpones the biggest and thorniest part of the fiscal cliff deal until March, when Congress will again have to wrangle over steep spending cuts that were set to kick in on Wednesday to defense and other industries.

Plus, nothing was resolved regarding the $16.4 trillion debt ceiling that we reached Monday.

Here are a few major changes that will hit your paycheck and savings.

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Fiscal Cliff Deal Averts the Crisis… But Now What?

[Singapore] - It's late Tuesday evening and I'm about to go on air with CNBC Asia in Singapore regarding the impact of the Fiscal Cliff bill which passed minutes ago after Republican leaders decided not to try and tack on amendments nor engage in further bickering.

Passed by a 257 to 167 vote, the bill is now headed to the White House and a draft may even be on the President's desk by the time you read this.

So I'll have to write quickly.

Here's the scoop on the fiscal cliff deal:

  1. The Bush-era income tax cuts become permanent for the majority of workers while they expire for so-called "top" earners. The break is at $400,000 for individuals and $450,000 for couples. That's approximately double Obama's campaign level and 80% more than his preferred "married couples rate" according to various sources. Dividend tax rates and capital gains rates for top earners will rise to 23.8% while personal exemptions and itemized deductions that are presently in force expire for individuals earning more than $250,000 and married couples earning more than $300,000. The alternative minimum tax is now fixed to avoid snagging still more middle class households.
  2. Expanded unemployment benefits will continue.
  3. Automatic spending cuts are deferred for two months.
  4. A two percent payroll tax cut expires.
  5. Estate taxes will get an inflation indexed exemption of $5 million or more and taxes will top out at 40%.

Key takeaways on the agreement:

  1. Once again Washington is kicking the can down the road. While it's already being played up by both parties as an example of bipartisanship, it's really a load of hooey. The bill merely puts off decisions for yet another round of fiscal follies a few months from now.

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What if There's No Fiscal Cliff Deal?

Just hours remain for Democrats and Republicans to come up with some kind of fiscal cliff deal to avert the $600 billion in tax increases and spending cuts that are set to kick in tomorrow, Jan. 1.

With both parties still at odds, a tumble over the cliff looks likely.

The only thing that's likely to happen is a very rushed deal that fails to deliver significant changes to the pre-programmed tax hikes and spending cuts.

There were small signs of optimism out of Washington.

"The discussions are going very well," Republican Sen. Bob Corker told CNBC's "Squawk Box" early Monday morning, adding though that the agreement probably won't include significant moves on deficit reductions.

But Senate Majority Leader Harry Reid, D-NV, maintains that a deal is not likely.

"There is significant distance between both sides," Reid said Sunday night.

Lawmakers reconvened today (Monday) and will remain holed up on Capitol Hill perhaps late into the night.

Here's what to expect if we fall off the fiscal cliff.

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Fiscal Cliff Deal Gets Lost in "Blame Game"

U.S. lawmakers headed back to Capitol Hill Thursday to try and avoid falling off the fiscal cliff, but the chances of doing so before the New Year have practically disappeared.

Sounding alarm bells Thursday were stern words from Senate Majority Leader Harry Reid, D-NV, who cautioned that there is hardly any time left for a deal.

"I have to be very honest. I don't know time-wise how it can happen now," a pessimistic Reid said in a press conference from the Senate floor.

Acknowledging the urgency for some kind of deal by New Year's Eve, U.S. President Barack Obama cut short his Hawaiian Christmas vacation to return to Washington.

According to CNN, a Republican senator said President Obama told Sen. Mitch McConnell, R-KY, that the president would send a proposal to the GOP on Thursday.

Retiring Rep. Steve LaTourette, R-OH, told CNN that lawmakers are putting finger-pointing ahead of deal making.

"Nobody is willing to pull the trigger" on an agreement because "everybody wants to play the blame game," he said. "This blame game is about to put us over the edge."

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Fiscal Cliff Deal Talks on Hold

U.S. President Barack Obama will cut his Hawaiian Christmas vacation short and return to the White House tomorrow (Thursday) to continue fiscal cliff deal negotiations.

Just five days remain for Democrats and Republicans to hammer out some kind of deal before the U.S. economy gets walloped with some $600 billion in tax increases and spending cuts at the federal level.

It's unclear if the parties can reach a fiscal cliff deal before the New Year, although they've shown little hope they can agree.

Republican House Speaker John Boehner on Friday put the burden on the president and the Democrat-controlled Senate to make the next move after they rejected his big concession on tax rates. Boehner agreed to extend tax rates on incomes under $400,000 (reduced from his previous threshold of $1,000,000) in exchange for steep spending cuts to reduce the swollen federal deficit.

"I don't want taxes to go up; Republicans don't want taxes to go up. But we only run the House. Democrats continue to run Washington," a frustrated Boehner said in a press conference Friday after he failed to rally support for his "Plan B," which never even made it to a vote among his own party.

While both sides have reduced expectations for an all-or-nothing deal, the two parties are still miles apart. Lawmakers are already prepping for the blame game should the New Year come without resolution.

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What the Fiscal Cliff Deal Could Do to You

Depending on the deal Congress makes for the fiscal cliff, middle-class Americans could face a total average tax burden of nearly 50%.

Middle-class Americans already pay an average of 43.12% in taxes, according to the non-partisan Tax Foundation.

Money Morning Chief Investment Strategist Keith Fitz-Gerald detailed the possible increase in the tax tab, citing data from FOX Business Network's expert on consumer and personal finance, Gerri Willis.

Absent a fiscal cliff deal, the mean middle class federal tax rate would climb from 25% to 28%, as Bush-era tax cuts expire in 2013. Payroll taxes would rise from 13.3% to 15.3%.

"Keep in mind that doesn't include state income tax hikes, city or county taxes, many of which are on the rise no matter where you live, thanks to decades of poor fiscal management," Fitz-Gerald said.

Add in state taxes, which average 4.82%, and the middle-class tax burden would average a whopping 48%.

As Fitz-Gerald put it, the possible tax increases amount to "an assault on the middle class."

The Most Painful Fiscal Cliff Hit to the Middle Class

The biggest tax increase threatening individuals for the 2012 tax year is a hike in the alternative minimum tax.

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Fiscal Cliff Deal: Plan B or Plan CYA?

Markets were higher in Europe and the United States yesterday (Tuesday) as progress was made on a fiscal cliff deal as well as on resolving debt ceiling issues before year end.

But then Republican House Speaker John Boehner rattled everyone's cages by proposing his "Plan B," which would make permanent the Bush tax cuts for all taxpayers with annual incomes under $1 million.

"Right now we need to do something to get the president's attention," Rep. Frank Lucas, R-OK, said in an interview with Bloomberg News. Boehner's approach "might just help," he said.

Fiscal Cliff Deal: What is Plan B?

The Washington Post reported that Plan B legislation was still being drafted late Tuesday but, in addition to making the Bush tax rates permanent for incomes under $1 million, Plan B would create a permanent alternative minimum tax patch and maintain the 35% inheritance tax on estates of more than $5 million.

Plan B does not address the automatic, across the board spending cuts that will go into effect if a fiscal cliff deal fails, nor does it address the looming debt ceiling.

"I believe it's important that we protect as many American taxpayers as we can," Boehner said Tuesday. "And our Plan B would protect American taxpayers who make a million dollars or less and have all of their current rates extended."

Plan B is intended to avoid tax hikes on the vast majority of Americans and to buy time to address spending cuts and other issues in January, following the holiday recess.

Boehner plans a House vote on his Plan B on Thursday.

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Tax Fight Remains Biggest Roadblock in Fiscal Cliff Deal

The fiscal cliff countdown clock tells us there is just 21 days left for Democrats and Republicans to come to some sort of deal.

With little resolved after months of back-and-forth discussions, which have recently turned into more heated exchanges, U.S. President Barack Obama has taken over the role of leading negations for his party, while Republican House of Representatives Speaker John Boehner is chief negotiator for the GOP.

The two men met for an unplanned White House meeting Sunday. Little details were made public regarding the powwow, but from duplicate statements from both sides, it doesn't appear much was accomplished.

The following messaged was delivered by White House spokesman John Earnest as well as an aide to Boehner. "This afternoon, the president and Speaker Boehner met at the White House to discuss efforts to resolve the fiscal cliff. We're not reading our details of the conversation, but the lines of communication remain open."

Statements from each side Monday made it clear core tax and spending issues remained unresolved, but both sides maintain they are waiting for details from the other side.

Democrats and Republicans are basically saying to each other, "it's your move."

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Everyone's Getting Antsy with No Fiscal Cliff Deal in Sight

After another day and still no progress on fiscal cliff discussions, many are beginning to think we might not see a deal before the end of the year, or even at all.

Republicans on Monday proposed their counter-offer to U.S. President Barack Obama's initial deal and, like his, it was basically the same plan previously offered.

This has led many, including Bank of America Corp. (NYSE: BAC) CEO Brian Moynihan, to wonder how far apart the two sides really are, and how long the effects of delaying a deal will be felt.

"I'm more concerned about business behavior slowing down than I am about consumer behavior," Moynihan told CNBC this morning. "I think we're in danger if this thing strings out into 2013 that you could start to have problems of what 2014 would look like."

The Republican-proposed deficit reduction deal, which was quickly rejected by the White House, would save $2.2 trillion over the next decade by generating an additional $800 billion in tax reform, but not by raising rates, and saving $300 billion by cutting discretionary spending, $600 billion in "health savings," $200 billion in changes to the consumer price index and another $300 billion in mandatory spending.

This is in stark contrast to the president's offer, and so far it seems neither side will budge from their original positions and even begin to compromise.

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Washington Claims it Can Reach Fiscal Cliff Deal By Dec. 31

Washington's tax talks began in earnest on Friday, as U.S. President Barack Obama and his team met with the GOP in a closed-door session in efforts to hammer out a fiscal cliff deal.

"We have the cornerstones of being able to work something out. This is not something we're going to wait until the last day of December to get done. We have a plan. We're going to move forward on it," Senate Majority Leader Harry Reid of Nevada told reporters as both parties emerged from the White House.

House Speaker Rep. John Boehner, R-OH, delivered an equally positive tone.

"To show our seriousness, we've put revenue on the table, as long as it's accompanied by significant spending cuts," said Boehner. "It's going to be incumbent on my colleagues to show the American people we're serious."

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