The money quote:
But the mega-increases have been the exception, not the rule. S&P calculates that the total cash dividend on its index of 500 blue-chip stocks rose 7.8 percent in 2003--a number that doesn't impress George Mairs, the veteran manager of the Mairs & Power Growth stock mutual fund in St. Paul.
"I've been disappointed with the magnitude of the increases," Mairs said. "I think too many of the increases have been marginal. It's the old story: Management is looking to hold on to more of the money."
Dividend tax cut's impact is low key
Companies are using their cash conservatively
By Tom Petruno, Tribune Newspapers
Los Angeles Times
January 2, 2004
Seven months after Congress voted to slash the tax rate on income from stock dividends, the verdict from investors and corporate managers is decidedly mixed.
The Bush administration promoted the tax cut, which lowered the top federal tax rate on dividends to 15 percent from 38.6 percent, as part of a broader economic stimulus package. But by making dividend income more attractive to investors, the effects were expected to go beyond just putting more spending money in some people's pockets.
Many economists predicted that the cut would boost the appeal of dividend-paying stocks compared with interest-paying bank accounts or bonds, giving the stock market overall a lift.
The change also was expected to force corporate managers to be better stewards of shareholders' capital in the long run. Instead of holding on to earnings for their own pet projects, managers were expected to think more about returning profit directly to investors via dividends, thereby allowing the marketplace to decide how the money should be put to work.
It's now apparent that the tax cut has had some effect, but experts differ on whether the reality has lived up to the hype:
