With a major overhaul in tax laws in more than 30 years,
U.S. corporates are expected to see a significant increase in their cash pile.
While the slashing of the corporate tax from 35% to 21% will lead to a rise in
profit after tax, a cash repatriation window will allow multinational
corporations to bring in cash stashed in foreign countries. Boosted by the
surge in domestic cash, many companies may opt for mergers & acquisitions
(M&A), share buybacks or dividend pay-out next year or beyond.
Here we will focus on stocks, which are expected to pay
better dividends in 2018 than their industry peers and also have growth
prospects. While the upside momentum of the market may continue amid strong
manufacturing data, rising corporate profits and interest rates, risks of a
downside remain. In such an environment, investors can add these stocks to
their portfolio to enjoy a steady stream of cash
Generally, companies paying dividends are financially stable
accruing profits in established markets. Share buyback programs and dividend
payouts boost investor confidence in the company, thereby raising its market
value. However, with interest rates rising in the United States, some amount of
cash may flow to the debt market. However, this does not weaken the prospects
of dividend investing. With investors getting worried about the Bull Run and
many even expecting a correction, dividend paying companies are better bets for
2018.
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