This document illustrates the scheduled 2013 changes to the dividend tax rates, the concept that not all dividend paying stocks are created equal, and how asset location can help.

1. Dividend Tax Increases
What Should You do with Your Dividend Payers?
PWM Advisory Group, LLC.
Scheduled Changes to Dividend Tax Rates
15% to Ordinary Income ( 43.4% )
0% to Ordinary Income ( 15.0% )
Dividend Paying Stocks
are not created equally.
Capital Dividend Pre-tax After-tax
Appreciation Yield Return Return*
An investor’s return on a dividend paying stock
consists of two components, capital appreciation Stock A 6% + 2% = 8% 7.1%
potential and dividend yield. The mix of these Stock B 2% + 6% = 8% 5.4%
components can greatly effect the after-tax
*assumes 0% portfolio turnover rate with dividends taxed at maximum level of 43.4%
return of the investment.
To the extent possible, investors should look to
optimize asset location as a means of maximizing
after-tax investment performance.
Asset Location Matters
Appreciation- 2013
Taxable
Potential Capital
Account
Stock A
Consider locating dividend paying stocks with
high potential capital appreciation and low yield
in taxable accounts. (Stock A) Tax Deferred
Account
Consider locating dividend paying stocks with Stock B
low potential capital appreciation and high yield
in tax-deferred accounts. (Stock B)
Dividend Yield - 2013
-NJ .com
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