This document discusses the benefits and implications of investing in dividend-paying stocks, which tend to be more stable and can indicate a company's financial health. It also addresses potential changes in tax rates for dividends, warning that taxation may rise after 2010, impacting investment decisions. Lastly, it explores concerns about inflation and deflation, emphasizing the importance of a long-term investment strategy in uncertain economic conditions.

1. V IEWPOINT
WHEN INVESTING PAYS DIVIDENDS
Volume 1 Issue 1
Typically, stocks that pay a portion of earnings to shareholders in the
July 2010
form of dividends are not considered to be superstars of the stock
market. They typically do not offer the growth or price appreciation
potential of small-cap companies, but tend to be more stable.
Dividends may not only help provide income but could also point the way toward possi-
ble investment opportunities. Aside from the potential for steady payments, dividends
can be a good way to assess a company’s health, quality of earnings, and future pros-
pects. In fact, research shows that companies that have started or consistently increased
dividend payouts since 1972 have outperformed the broader market.1
Companies that pay dividends tend to be large and well established, and their stock may
be appropriate in a conservatively allocated portfolio. Companies may elect to pay a divi-
dend because they consider it to be a better option for distributing profits than reinvesting
in the business.
Steve Stanganelli, CFP®, CRPC®
Even though income stocks are theoretically less risky than growth stocks, the return and
principal value of all stocks fluctuate with changes in market conditions. Shares, when
About Clear View sold, may be worth more or less than their original cost.
The Uncertainty of Taxes
Clear View Wealth Advisors, LLC
is an independent Registered In-
vestment Advisor providing finan- Under current law, qualified dividends are taxed at a maximum rate of 15%. For taxpay-
cial planning, tax consulting, and ers in the two lowest federal income tax brackets (10% and 15%), the tax rate on divi-
investment advisory services to dends is zero.
individuals and couples throughout
Massachusetts. However, these low tax rates are set to expire on December 31, 2010, unless Congress
(Continued on Page 2)
Clear View works on a FEE
ONLY/FEE-for-SERVICE basis.
The Great Inflation-Deflation them to study. The last bout occurred dur-
ing the Great Depression.1 Nonetheless,
Debate given that the current inflation rate is quite
low (core inflation grew just 0.9% during
We’re all used to worrying about the 12 months ending in April, the mildest
inflation. It ranks among the increase since January 1966), there’s a pos-
greatest threats to long-term fi- sibility that the U.S. economy could fall
nancial security. But inflation has into a deflationary period.2 For this reason,
it’s a good idea to understand the risks and
www.ClearViewWealthAdvisors.com been so low that, in some quar- the potential benefits of deflation.
ters, deflation is being whispered
about as the concern du jour. If you understand inflation, then you al-
Free Rollover Helpline ready have the background to understand
978-388-0020 deflation. Inflation is a sustained increase
Call for Your Free Guide Deflation occurs so rarely that even the in prices. The root cause is frequently
“Six Best & Worst IRA Rollover experts have to discuss it in theoretical monetary policy, but it can also be caused
Decisions” terms because there is very little data for when one or more core commodities
(Continued on Page 2)

2. Page 2 V olu me 1 , I s s u e 1
Clear View Wealth Advisors, LLC 978-388-0020
WHEN INVESTING PAYS DIVIDENDS (from page 1)
acts to extend them. If the special tax treatment is allowed
to expire, dividend income taxation will revert to the rules
that were in effect prior to 2003. Under these rules, divi-
dend income is taxed at the same rates as ordinary income,
which could be as high as 39.6%.
The possibility of higher dividend tax rates in 2011 is a fac-
tor to consider when investing in dividend-paying stocks. It
would be wise to consult with a tax professional before tak-
ing any specific action.
Income stocks can offer a steady payout as well as the pos-
sibility of solid returns. Call today to discuss the role that
income stocks can play in your portfolio.
1) CNNMoney, November 9, 2009
The Great Inflation-Deflation Debate from page 1
financial crisis, monetary policy has seldom been looser,
needed to produce essential goods and services, such as meaning the Federal Reserve may have limited means to battle
food and energy, become expensive due to scarcity and drive a potential battle with deflation.
up other prices.
Maybe Not
Deflation is nearly the opposite. It is a sustained decrease in
prices, usually during a period of slow or negative economic Although some experts believe that deflation is on the horizon,
growth. Sellers lower their prices in response to weak demand, there are several conditions that have economists and policy-
which causes their profits to fall. Eventually, the sellers need to makers worried about the potential for higher inflation in the
find ways to offset their lost earnings, so they cut back on their coming years.
own spending on goods, services, and wages, which may lead
to job losses, factory closures, and falling incomes. This further •The ramp-up in government spending resulting from economic
depresses demand, causing sellers to lower their prices, and so stimulus and emergency measures.
on. This cycle can worsen if it persists because consumers who •Longer-term structural deficits caused by the government’s
still have money to spend may grow fearful and rein in their growing financial obligations associated with Social Security
own spending. and Medicare, and the immense national debt that could result
if these challenges are not addressed.
Deflation can be caused by a central bank’s (i.e., the U.S. Fed- •The Federal Reserve’s injection of nearly $1 trillion into the
eral Reserve’s) monetary policy, especially through reductions banking system during the financial crisis. Although banks have
in the availability of money or credit. It can also occur when kept much of it in reserve, many worry that prices will rise
spending falls dramatically in one sector of the economy. For when credit eases and that money begins circulating.3
example, if the government curtails spending, then the busi-
nesses, workers, and consumers who depended on that spending Nobody knows for certain the direction that prices will take in
for their own incomes would no longer be able to maintain their the near term. Ultimately, inflation and deflation are variables
own spending habits, thus creating hardships for the businesses that you can’t control; therefore it is wise to adhere to a long-
and workers their incomes supported. If this loss of demand term investment plan that has been crafted to fit your personal
becomes widespread, a deflationary condition can occur. situation and is positioned to withstand fluctuations in market
conditions.
Theoretically, the cure for deflation would be for the central
1) Thomson Reuters, 2010 (consumer price index for the period 3/31/1913 to
bank to create inflation through a loosening of its monetary 12/31/2010)
policy, by lowering interest rates and expanding the money 2) U.S. Bureau of Labor Statistics, 2010
supply. However, because of the Fed’s response to the 2008 3) Federal Reserve Bank of Minneapolis, 2008
Viewpoint is produced by Clear View Wealth Advisors, LLC for the benefit of its clients and allied professionals. Although the information here is gathered from reliable sources, readers should not
act upon it without professional advice. Past performance is no guarantee of future results. Examples with hypothetical returns illustrated are not representative of a specific investment. Clear View
Wealth Advisors, LLC 12 Amidon Ave., Amesbury, MA 01913 & 25 Lowell St., Wilmington, MA 01887 Tel: 978 388-0020 Email: Steve@ClearViewWealthAdvisors.com