Higher Dividend Taxes on the Way; Oil-Field Dividends

This week there has been a lot of talk about President Obama’s 2013 budget changes. One of the changes listed in the current incarnation is for the special tax rate for dividends to disappear starting on January 1, 2013. Right now, dividends are taxed much the same way that capital gains are taxed — with a top rate of 15%.

All of that could disappear if the special rate for qualifying dividends disappears and dividends revert to being considered ordinary income. With the schedule demise of the Bush tax cuts on the table, the top rate could also go up. This could mean that you could see more of your dividend income taxed. Many are already concerned about the state of affairs, since some consider dividends to already be double-taxed — companies pay taxes on the money before paying the dividend, and then dividend recipients pay taxes on what they receive. With dividend taxes likely to go up, this only compounds the problem.

Oil-Field Service Companies Offer Interesting Dividend Opportunities: EXH, CLB, RES

As energy becomes a hot topic, oil-field service companies are providing different opportunities to earn dividends. Some of the companies receiving attention for their dividends right now in the oil-field services include:

  • Exterran Holdings, Inc.: EXH has been paying a very high yield recently (although that could end, since the payout exceeds the earnings).
  • RPC: RES features a good dividend growth rate, but the company might have a hard time maintaining its growth rate over time. The upside to RES is the fact that the company keeps its debt low, and its profit margins higher than average.
  • Core Laboratories: CLB is another company with red-hot dividend growth. The company offers oil reservoir management services, and claims to innovate enhancement products. CLB could provide solid dividend earnings in the future, if it can maintain.

In the end, you do need to do your research. These types of companies are rarely thought of, but they can offer opportunities.