---
title: Dividend Growth As Part of Your Tax Planning Strategy
description: While bonds are a stable choice, stocks provide the potential for dividend growth and should be considered when deciding on your investment strategy.
image: https://www.letsassemble.com/hs-fs/file-2508525287-jpg/blog-files/Dividend_Growth_As_Part_of_Your_Investment_Strategy.jpg
---

[![Assembly Wealth](https://www.letsassemble.com/hs-fs/hubfs/Assembly/logos/Assembly-Wealth-Logo-Orange-500px.png?width=300&height=70&name=Assembly-Wealth-Logo-Orange-500px.png "Assembly Wealth")](https://www.letsassemble.com/)

The Money Manager People TM

[800-541-7774](tel:+18005417774)

[![RESEARCH MONEY MANAGERS](https://no-cache.hubspot.com/cta/default/10700/7ecbcb66-3fbb-41e3-b219-c24fb3c769c5.png)](https://cta-redirect.hubspot.com/cta/redirect/10700/7ecbcb66-3fbb-41e3-b219-c24fb3c769c5)

[![Client Center](https://no-cache.hubspot.com/cta/default/10700/8691dcb4-caa3-42c2-a810-77b59f461fd2.png)](https://cta-redirect.hubspot.com/cta/redirect/10700/8691dcb4-caa3-42c2-a810-77b59f461fd2)

[Home](https://www.letsassemble.com/)

WrapManager's Wealth Management Blog

When life changes, we can help you thoughtfully respond.

[< Back to read another post](https://www.letsassemble.com/wealth-management-blog)

# Dividend Growth As Part of Your Tax Planning Strategy

Posted by [ Michael J. O'Connor | CWS®, Vice President Investments](https://www.letsassemble.com/wealth-management-blog/author/michael-j-oconnor)  
 February 25, 2015

- [Tweet](https://twitter.com/share)

[![Dividend_Growth_As_Part_of_Your_Investment_Strategy](https://www.letsassemble.com/hs-fs/file-2508525287-jpg/blog-files/Dividend_Growth_As_Part_of_Your_Investment_Strategy.jpg)](http://www.wrapmanager.com/wealth-management-blog/dividend-growth-as-part-of-your-tax-planning-strategy)Income-yielding investments can be an integral part of your retirement lifestyle planning. Incorporating dividend growth investments into your retirement plan doesn’t have to be difficult. When choosing investments that will provide a steady stream of income, look beyond just fixed-income securities like bonds, CDs, and money market funds. Stocks, too, can be an important source of investment income.

### Not Just Bonds—Stocks, Too!

Stocks that pay dividends can play an important role in your income-yielding investment strategy. Bonds, CDs, and money market funds may seem like a stable choice, but may not yield healthy returns in today’s low-interest market conditions. Stocks, however, can be important players in your portfolio as income-yielding investments. Let’s learn more about dividend growth as a part of your retirement lifestyle planning.

### Companies That Pay Dividends

Companies that pay respectable dividends are generally well-established, growth-oriented companies. Johnson & Johnson, for example, increased their dividend payout every single year between 1963 and 2004.1 Additionally, emerging markets companies are increasingly offering dividends alongside more established, well-known firms.

However, you want to be cautious about investing in companies that have increased their dividends drastically over a short period of time. If you see a large increase in dividend payout, consider whether the company’s growth may be overly optimistic and unsustainable into the future.

### Calculating Dividend Yield

Dividend yield is calculated by dividing the annual dividend per share by the stock’s share price: a company with a share price of $100 and a dividend of $5 per share has a 5% dividend yield.2 On the S&P 500, the average dividend yield is 2-3%.1

One of the reasons dividend investing can be such a powerful tool in your overall investment planning is that it increases your overall return. For example, if you purchase a stock that goes up by 6% in a year while simultaneously paying a 4% dividend, then you have earned 10% on your investment.

### Considering the Risks of Dividend Growth

It’s tempting to become overly focused on dividend yield and lose sight of your overall investment goals. The fact that a company offers dividends doesn’t necessarily indicate a good, healthy company. Dividends are paid out of a company’s net income, so higher dividends mean that the company retains lower earnings, and a company that doesn’t reinvest enough money into operations can soon find itself in trouble.

Therefore, it’s important to carefully screen dividend-yielding stocks to ensure that the companies’ operations are sustainable and dependable. Your financial advisor can be incredibly helpful for this kind of screening and advice.

### Always Consider Taxes

When it comes to your long-term financial planning, it’s always wise to consider tax ramifications. Check with your financial advisor, accountant, or tax attorney for more information before you begin investing in dividend-yielding stocks. Careful examination of your personal and local tax situation can help you to decide if dividend yield is an advantageous strategy for your portfolio.

For more information about dividend strategies, our Wealth Managers are here to help. Give us a call at 1-800-541-7774, start the conversation [by email](http://www.wrapmanager.com/contact) or [learn more about how we might help you](http://www.wrapmanager.com/wealth-preservation-strategies).

[![Like What You've Read? Subscribe Here!](https://no-cache.hubspot.com/cta/default/10700/5ce6db8c-6757-43bb-831d-b67f40d96a4c.png)](https://cta-redirect.hubspot.com/cta/redirect/10700/5ce6db8c-6757-43bb-831d-b67f40d96a4c)

 

---

 Sources:

1. [Investopedia](http://www.investopedia.com/university/stockpicking/stockpicking6.asp)

2. [The Motley Fool](http://wiki.fool.com/Dividend_yield)

---

 

There are no guarantees that dividend paying stocks will continue to pay dividends. In addition, dividend paying stocks may not experience the same capital appreciation potential as non-dividend paying stocks. WrapManager, Inc. does not advise on any income tax requirements or issues. Use of any information presented by WrapManager, Inc. is for general information only and does not represent tax or legal advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance.

 [![Retirement-planning-strategy-ebook-CTA-large](https://no-cache.hubspot.com/cta/default/10700/cabe7a81-5886-482b-b69a-f18d67190c25.png)](https://cta-redirect.hubspot.com/cta/redirect/10700/cabe7a81-5886-482b-b69a-f18d67190c25)

[Dividend Investing](https://www.letsassemble.com/wealth-management-blog/topic/dividend-investing)

### Subscribe to Updates

[Subscribe to RSS Feed](https://www.letsassemble.com/wealth-management-blog/rss.xml)

[![New Call-to-action](https://no-cache.hubspot.com/cta/default/10700/ffe2a394-957b-481b-9f80-4ef176bd6aaf.png)](https://cta-redirect.hubspot.com/cta/redirect/10700/ffe2a394-957b-481b-9f80-4ef176bd6aaf)

### Most Recently Published

### Blog Authors

[![Gabriel Burczyk](http://www.wrapmanager.com/hs-fs/hub/10700/file-2347381761-jpg/Athors_Avatars/Gabe-avatar.jpg "Gabriel Burczyk")](http://www.wrapmanager.com/wealth-management-blog/author/gabriel-burczyk)

[**Gabriel Burczyk,**](http://www.wrapmanager.com/wealth-management-blog/author/gabriel-burczyk)  
[Founder & CEO](http://www.wrapmanager.com/wealth-management-blog/author/gabriel-burczyk)

[![Valerie De Vol](http://www.wrapmanager.com/hs-fs/hub/10700/file-2457588837-jpg/Athors_Avatars/Valerie-De-Vol-avatar.jpg "Valerie De Vol")](http://www.wrapmanager.com/wealth-management-blog/author/valerie-de-vol)

[**Valerie De Vol, **IACCP®  
Chief Operating Officer](http://www.wrapmanager.com/wealth-management-blog/author/valerie-de-vol)

[![Seton-avatar.jpg](http://www.wrapmanager.com/hs-fs/hub/10700/file-2344519198-jpg/Athors_Avatars/Seton-avatar.jpg "Seton-avatar.jpg")](http://www.wrapmanager.com/wealth-management-blog/author/seton-mcandrews)

[**Seton McAndrews, **CFP®  
](http://www.wrapmanager.com/wealth-management-blog/author/seton-mcandrews)[Vice President - Investments](http://www.wrapmanager.com/wealth-management-blog/author/seton-mcandrews)

[![Doug Hutchinson](http://www.wrapmanager.com/hs-fs/hub/10700/file-2347381751-jpg/Athors_Avatars/Doug-avatar.jpg "Doug Hutchinson")](http://www.wrapmanager.com/wealth-management-blog/author/doug-hutchinson)

**[Doug Hutchinson,](http://www.wrapmanager.com/wealth-management-blog/author/doug-hutchinson) **[CFA®  
](http://www.wrapmanager.com/wealth-management-blog/author/doug-hutchinson)[Director of Research and Trading](http://www.wrapmanager.com/wealth-management-blog/author/doug-hutchinson)

![Katie - square.png](https://www.wrapmanager.com/hubfs/Katie%20-%20square.png "Katie - square.png")

[**Katie O'Connor  
**Director of Client Services](https://www.wrapmanager.com/wealth-management-advisors/katie-oconnor)

**Important Disclosure Concerning WrapManager Blogs**

Blogs found at this site have been created or supported by WrapManager. The information provided in a blog post prepared by WrapManager or an associated person of WrapManager is generally limited to financial and economic issues, but may include a discussion of general interest items. The views and opinions expressed on this blog are purely the blog authors, and not necessarily those of WrapManager, Inc. Certain blog posts include information pertaining to WrapManager’s investment advisory services and the products and services of unaffiliated money managers. Such information is provided for information purposes only. Accordingly, information provided in a blog should not be construed by any consumer and/or prospective client as a solicitation to effect or attempt to effect transactions in securities or the rendering of personalized investment advice. Any subsequent, direct communication by WrapManager with a prospective client shall be conducted by a representative of WrapManager. Moreover, no client or prospective client should assume content contained on the website serves as a substitute for personalized advice from WrapManager. Different types of investments involve varying degrees of risk, and there can be no assurance that any investment, portfolio or money manager referred to within the blog will be suitable for your individual situation and risk tolerance or will be profitable. WrapManager recommends that you retain a financial professional to provide you with specific guidance regarding your financial situation before investing. Investment in equity strategies involves substantial risk and has the potential for partial or complete loss of funds invested.

Although the information included in the WrapManager, Inc. website and blog has been obtained from sources WrapManager believes to be reliable, we do not guarantee its accuracy and information may be subject to change without notice. This website should not be regarded as a complete analysis of the subjects discussed. Information on this site should not be relied upon as a substitute for legal, tax or accounting advice by a professional in your local jurisdiction.

Comments made by third parties are subject to moderation by WrapManager and may not appear on this blog until they have been deemed appropriate for posting. Also, due to the volume of comments received, not all comments will be posted.

WrapManager does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party website linked to WrapManager's web site or incorporated within a blog post. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

 

 

```json
{
  "@context" : "https://schema.org",
  "@type" : "BlogPosting",
  "author" : {
    "@type" : "Person",
    "name" : "Michael J. O'Connor",
    "url" : "https://www.letsassemble.com/wealth-management-blog/author/michael-j-oconnor"
  },
  "datePublished" : "2015-02-25T14:30:00.000Z",
  "headline" : "Dividend Growth As Part of Your Tax Planning Strategy",
  "image" : [ "https://www.letsassemble.com/hs-fs/file-2508525287-jpg/blog-files/Dividend_Growth_As_Part_of_Your_Investment_Strategy.jpg" ],
  "mainEntityOfPage" : {
    "@id" : "https://www.letsassemble.com/wealth-management-blog/dividend-growth-as-part-of-your-tax-planning-strategy",
    "@type" : "WebPage"
  },
  "publisher" : {
    "@type" : "Organization",
    "logo" : {
      "@type" : "ImageObject",
      "url" : "https://www.letsassemble.com/hubfs/Assembly/logos/Assembly-Wealth-Logo-Orange-500px.png"
    },
    "name" : "Assembly"
  }
}
```