Go to Jeff Salisbury LWGate Home Page.From: "Edward W. Gjertsen II" <ed@macktracks.com>
Subject: RE: [CANSLIM] Tax Free Dividends
Date: Mon, 14 Apr 2003 09:11:18 -0500
Next Article (by Date): Re: [CANSLIM] Tax Free Dividends "Tom Worley"
Previous Article (by Date): RE: [CANSLIM] Bailing out of a would-be breakout Mike
Next in Thread: Re: [CANSLIM] Tax Free Dividends "Tom Worley"
Articles sorted by: [Date]
[Author]
[Subject]
This is a multi-part message in MIME format.
- ------=_NextPart_000_013F_01C30265.CF2867B0
Content-Type: multipart/alternative;
boundary="----=_NextPart_001_0140_01C30265.CF2867B0"
- ------=_NextPart_001_0140_01C30265.CF2867B0
Content-Type: text/plain;
charset="us-ascii"
Content-Transfer-Encoding: 7bit
Here are comments from an article I authored:
President Bush has stirred up a maelstrom of debate. No, not whether or
not the double taxation of dividends is fair, or which societal class
will benefit most, but how much money will be sucked out of the bond
market and reallocated into dividend paying stocks. If your financial
advisor suggests to liquidate your bond portfolio to purchase dividend
paying stocks to take advantage of tax-free income, gather all your
assets and run for the exit.
The difference between a bond and a stock is much more than an interest
rate or dividend yield. Interest is not a dividend and dividends are
not interest. The IRS in their wisdom even categorizes these payments
differently. While they both are reported on Schedule B in tax returns,
bond investors generally receive a 1099-INT for interest payments where
common stock holders receive a 1099-DIV for dividend payments.
A bond is a loan made by investors to a corporation, the U.S.
Government, or a municipality in which that entity is obligated to pay
interest at a stated rate and pay back principle at a stated time.
Conversely, common stock provides ownership of a corporation. Dividends
are a promise made by a corporate Board of Directors to pay shareholders
a specific amount of money for each share of stock held.
For example, a 10-year Treasury bond may pay a current yield of 3.85%.
A $100,000 purchase of the 10-year bond will create $3,850 of interest
payment every year for 10 years. At the end of the 10-year period, the
investor will receive back $100,000 of principle payment.
A common stock whose price is $40 and pays a dividend of $1.54 has a
dividend yield of 3.85%. The dividend yield is calculated by dividing
the dividend by the stock price. A $100,000 purchase would involve 2,500
shares and create $3,850 of dividends per year. At the end of a 10-year
period, no one can know where the stock price will be.
This wherein lies the problem with the debate on just how much money
will shift from bonds to dividend paying stocks. Bonds and stocks
represent a completely different risk-reward scenario. While today many
wish this were true, common stocks do not pay back principle at a stated
time in the future.
The reallocation debate requires one to disregard an important risk;
Market Risk. The one lesson most investors hopefully learned is that
market risk is not to be ignored. Three consecutive years of declines,
a dubious performance not seen in over 60 years, may provide an enticing
argument to invest in dividend paying equities. Besides how much worse
can the stock market get? With interest rates so low, why not take
advantage of yield and possible growth. Popular pundits will discuss
how the risk reward scenario should be in favor of equities. Don't be
fooled.
One item I am confident of. Wall Street investment firms are very
imaginative and resourceful. Should President Bush's proposed tax cut
on dividends become law, look for these firms to create investment
vehicles to generate badly needed underwriting fees. For the near
future, don't be seduced to sell your bonds in anticipation of buying
dividend paying stocks. Make sure recommended transactions will benefit
you and not your broker's pocketbook or wallet.
Ed Gjertsen II
<mailto:ed@macktracks.com> ed@macktracks.com
Confidentiality Notice: This e-mail message, including any attachments,
is for the sole use of the intended recipient(s) and may contain
confidential and privileged information. Any unauthorized review, use,
disclosure or distribution is prohibited. If you are not the intended
recipient, please contact the sender by reply e-mail and destroy all
copies of the original message.
- -----Original Message-----
From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com] On Behalf Of Ted Kozek
Sent: Thursday, April 10, 2003 9:40 PM
To: canslim@lists.xmission.com
Subject: [CANSLIM] Tax Free Dividends
Would someone like to comment on the effect tax free dividends will have
on corporate, treasury any municipal bond rates
- ------=_NextPart_001_0140_01C30265.CF2867B0
Content-Type: text/html;
charset="us-ascii"
Content-Transfer-Encoding: quoted-printable
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN">
<html>
<head>
<META HTTP-EQUIV=3D"Content-Type" CONTENT=3D"text/html; =
charset=3Dus-ascii">
<meta name=3DGenerator content=3D"Microsoft Word 10 (filtered)">
<style>
<!--
/* Font Definitions */
@font-face
{font-family:Tahoma;
panose-1:2 11 6 4 3 5 4 4 2 4;}
/* Style Definitions */
p.MsoNormal, li.MsoNormal, div.MsoNormal
{margin:0in;
margin-bottom:.0001pt;
font-size:12.0pt;
font-family:"Times New Roman";}
a:link, span.MsoHyperlink
{color:blue;
text-decoration:underline;}
a:visited, span.MsoHyperlinkFollowed
{color:purple;
text-decoration:underline;}
p.MsoAutoSig, li.MsoAutoSig, div.MsoAutoSig
{margin:0in;
margin-bottom:.0001pt;
font-size:12.0pt;
font-family:"Times New Roman";}
span.EmailStyle17
{font-family:"Times New Roman";
color:blue;
font-weight:normal;
font-style:normal;
text-decoration:none none;}
@page Section1
{size:8.5in 11.0in;
margin:1.0in .75in 1.0in .75in;}
div.Section1
{page:Section1;}
- -->
</style>
</head>
<body bgcolor=3Dwhite lang=3DEN-US link=3Dblue vlink=3Dpurple>
<div class=3DSection1>
<p class=3DMsoNormal><font size=3D2 color=3Dblue face=3D"Times New =
Roman"><span
style=3D'font-size:10.0pt;color:blue'>Here are comments from an article =
I authored:</span></font></p>
<p class=3DMsoNormal><font size=3D2 color=3Dblue face=3D"Times New =
Roman"><span
style=3D'font-size:10.0pt;color:blue'> </span></font></p>
<p class=3DMsoNormal><font size=3D3 face=3D"Times New Roman"><span =
style=3D'font-size:
12.0pt'>President Bush has stirred up a maelstrom of debate. No, =
not whether
or not the double taxation of dividends is fair, or which societal class =
will
benefit most, but how much money will be sucked out of the bond market =
and reallocated
into dividend paying stocks. If your financial advisor suggests to =
liquidate
your bond portfolio to purchase dividend paying stocks to take advantage =
of
tax-free income, gather all your assets and run for the exit. =
</span></font></p>
<p class=3DMsoNormal><font size=3D3 face=3D"Times New Roman"><span =
style=3D'font-size:
12.0pt'> </span></font></p>
<p class=3DMsoNormal><font size=3D3 face=3D"Times New Roman"><span =
style=3D'font-size:
12.0pt'>The difference between a bond and a stock is much more than an =
interest
rate or dividend yield. Interest is not a dividend and dividends =
are not interest.
The IRS in their wisdom even categorizes these payments differently. =
While they
both are reported on Schedule B in tax returns, bond investors generally =
receive
a 1099-INT for interest payments where common stock holders receive a =
1099-DIV
for dividend payments.</span></font></p>
<p class=3DMsoNormal><font size=3D3 face=3D"Times New Roman"><span =
style=3D'font-size:
12.0pt'> </span></font></p>
<p class=3DMsoNormal><font size=3D3 face=3D"Times New Roman"><span =
style=3D'font-size:
12.0pt'>A bond is a loan made by investors to a corporation, the U.S.
Government, or a municipality in which that entity is obligated to pay =
interest
at a stated rate and pay back principle at a stated time. =
Conversely, common
stock provides ownership of a corporation. Dividends are a promise =
made by a
corporate Board of Directors to pay shareholders a specific amount of =
money for
each share of stock held. </span></font></p>
<p class=3DMsoNormal><font size=3D3 face=3D"Times New Roman"><span =
style=3D'font-size:
12.0pt'> </span></font></p>
<p class=3DMsoNormal><font size=3D3 face=3D"Times New Roman"><span =
style=3D'font-size:
12.0pt'>For example, a 10-year Treasury bond may pay a current yield of =
3.85%.
A $100,000 purchase of the 10-year bond will create $3,850 of interest =
payment
every year for 10 years. At the end of the 10-year period, the =
investor will
receive back $100,000 of principle payment.</span></font></p>
<p class=3DMsoNormal><font size=3D3 face=3D"Times New Roman"><span =
style=3D'font-size:
12.0pt'> </span></font></p>
<p class=3DMsoNormal><font size=3D3 face=3D"Times New Roman"><span =
style=3D'font-size:
12.0pt'>A common stock whose price is $40 and pays a dividend of $1.54 =
has a
dividend yield of 3.85%. The dividend yield is calculated by =
dividing the
dividend by the stock price. A $100,000 purchase would involve 2,500 =
shares and
create $3,850 of dividends per year. At the end of a 10-year =
period, no one
can know where the stock price will be.</span></font></p>
<p class=3DMsoNormal><font size=3D3 face=3D"Times New Roman"><span =
style=3D'font-size:
12.0pt'> </span></font></p>
<p class=3DMsoNormal><font size=3D3 face=3D"Times New Roman"><span =
style=3D'font-size:
12.0pt'>This wherein lies the problem with the debate on just how much =
money
will shift from bonds to dividend paying stocks. Bonds and stocks =
represent a completely
different risk-reward scenario. While today many wish this were =
true, common
stocks do not pay back principle at a stated time in the future. =
</span></font></p>
<p class=3DMsoNormal><font size=3D3 face=3D"Times New Roman"><span =
style=3D'font-size:
12.0pt'> </span></font></p>
<p class=3DMsoNormal><font size=3D3 face=3D"Times New Roman"><span =
style=3D'font-size:
12.0pt'>The reallocation debate requires one to disregard an important =
risk;
Market Risk. The one lesson most investors hopefully learned is =
that market risk
is not to be ignored. Three consecutive years of declines, a =
dubious performance
not seen in over 60 years, may provide an enticing argument to invest in
dividend paying equities. Besides how much worse can the stock market =
get? With
interest rates so low, why not take advantage of yield and possible =
growth.
Popular pundits will discuss how the risk reward scenario should be in =
favor of
equities. Don’t be fooled. </span></font></p>
<p class=3DMsoNormal><font size=3D3 face=3D"Times New Roman"><span =
style=3D'font-size:
12.0pt'> </span></font></p>
<p class=3DMsoNormal><font size=3D3 face=3D"Times New Roman"><span =
style=3D'font-size:
12.0pt'>One item I am confident of. Wall Street investment firms =
are very
imaginative and resourceful. Should President Bush’s =
proposed tax cut on
dividends become law, look for these firms to create investment vehicles =
to generate
badly needed underwriting fees. For the near future, don’t be =
seduced to
sell your bonds in anticipation of buying dividend paying stocks. =
Make sure recommended
transactions will benefit you and not your broker’s pocketbook or =
wallet.</span></font></p>
<p class=3DMsoNormal><font size=3D2 color=3Dblue face=3D"Times New =
Roman"><span
style=3D'font-size:10.0pt;color:blue'> </span></font></p>
<p class=3DMsoNormal><font size=3D2 color=3Dblue face=3D"Times New =
Roman"><span
style=3D'font-size:10.0pt;color:blue'> </span></font></p>
<div>
<div>
<p class=3DMsoAutoSig><font size=3D3 color=3Dblue face=3D"Times New =
Roman"><span
style=3D'font-size:12.0pt;color:blue'><img width=3D64 height=3D46
src=3D"cid:image001.gif@01C30265.CE527A10"></span></font></p>
<p class=3DMsoNormal><font size=3D3 color=3Dblue face=3D"Times New =
Roman"><span
style=3D'font-size:12.0pt;color:blue'> </span></font></p>
<p class=3DMsoNormal><font size=3D2 color=3Dblue face=3D"Times New =
Roman"><span
style=3D'font-size:10.0pt;color:blue'>Ed Gjertsen II</span></font></p>
<p class=3DMsoNormal><font size=3D2 color=3Dblue face=3D"Times New =
Roman"><span
style=3D'font-size:10.0pt;color:blue'><a =
href=3D"mailto:ed@macktracks.com"><font
size=3D3><span =
style=3D'font-size:12.0pt'>ed@macktracks.com</span></font></a></span></fo=
nt></p>
<p class=3DMsoNormal><font size=3D3 color=3Dblue face=3D"Times New =
Roman"><span
style=3D'font-size:12.0pt;color:blue'> </span></font></p>
<p class=3DMsoNormal><font size=3D3 color=3Dblue face=3D"Times New =
Roman"><span
style=3D'font-size:12.0pt;color:blue'> </span></font></p>
<p class=3DMsoNormal><font size=3D2 color=3Dblue face=3D"Times New =
Roman"><span
style=3D'font-size:10.0pt;color:blue'>Confidentiality Notice: This =
e-mail
message, including any attachments, is for the sole use of the intended
recipient(s) and may contain confidential and privileged =
information. Any
unauthorized review, use, disclosure or distribution is =
prohibited. If
you are not the intended recipient, please contact the sender by reply =
e-mail and
destroy all copies of the original message.</span></font></p>
</div>
</div>
<p class=3DMsoNormal><font size=3D2 color=3Dblue face=3D"Times New =
Roman"><span
style=3D'font-size:10.0pt;color:blue'> </span></font></p>
<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D2 =
face=3DTahoma><span
style=3D'font-size:10.0pt;font-family:Tahoma'>-----Original =
Message-----<br>
<b><span style=3D'font-weight:bold'>From:</span></b>
owner-canslim@lists.xmission.com =
[mailto:owner-canslim@lists.xmission.com] <b><span
style=3D'font-weight:bold'>On Behalf Of </span></b>Ted Kozek<br>
<b><span style=3D'font-weight:bold'>Sent:</span></b> Thursday, April 10, =
2003
9:40 PM<br>
<b><span style=3D'font-weight:bold'>To:</span></b> =
canslim@lists.xmission.com<br>
<b><span style=3D'font-weight:bold'>Subject:</span></b> [CANSLIM] Tax =
Free
Dividends</span></font></p>
<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D3 =
face=3D"Times New Roman"><span
style=3D'font-size:12.0pt'> </span></font></p>
<div>
<p class=3DMsoNormal style=3D'margin-left:.5in'><font size=3D3 =
face=3D"Times New Roman"><span
style=3D'font-size:12.0pt'>Would someone like to comment on the effect =
tax free
dividends will have on corporate, treasury any municipal bond =
rates</span></font></p>
</div>
</div>
</body>
</html>
- ------=_NextPart_001_0140_01C30265.CF2867B0--
- ------=_NextPart_000_013F_01C30265.CF2867B0
Content-Type: application/octet-stream;
name="image001.gif"
Content-Transfer-Encoding: base64
Content-ID: <image001.gif@01C30265.CE527A10>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- ------=_NextPart_000_013F_01C30265.CF2867B0--
- -
- -To subscribe/unsubscribe, email "majordomo@xmission.com"
- -In the email body, write "subscribe canslim" or
- -"unsubscribe canslim". Do not use quotes in your email.
Next Article (by Date): Re: [CANSLIM] Tax Free Dividends "Tom Worley"
Previous Article (by Date): RE: [CANSLIM] Bailing out of a would-be breakout Mike
Next in Thread: Re: [CANSLIM] Tax Free Dividends "Tom Worley"
Articles sorted by: [Date]
[Author]
[Subject]