Get to Know Your BDCs
The search for income remains one of the most important concerns for investors in today's confusing financial markets. Yields on bonds, CDs and other traditional income investments are at historic lows and cannot provide the payout investors seek. For the past few years, money in search of yield has been pushed into equity markets and dividend-paying stocks. It has been a hugely successful strategy so far, as blue-chip, high-yielding stocks have performed admirably since the depths of the credit crisis in 2008. Like everything else in the markets, it has worked so well that it has attracted attention and heavy promotion of the strategy has raised valuations and eliminated many opportunities. Now we face the possibility of tax increases on dividends. This is probably not the best time to put new money to work in the traditional sources of equity income.
For investors who have to get the cash to work and the dividends flowing, it is probably best to look at unconventional sources of yield that are not taxed as ordinary dividends. Such concerns would include real estate investment trusts and business development companies (BDC). These companies pay not qualified dividends, are already taxed at regular tax rates, and they are not subject to a readjustment if tax rates increase. Looking for situations that are not subject to the tax cliff and are attractive values can reward income investors, even in today's uncertain market....449 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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