Cuggino sees dividend paying stocks as good long-term investments, despite what may or may not happen with tax policy.
"The reality is there are a lot of good businesses selling at reasonable prices right now in the stock market and in many cases they are providing dividend yields that are in excess of the 10-year Treasury, the 30-year Treasury," he said.
He also noted that taxes may not go up. "I mean if we do in fact have a double dip or a slowdown, it’s not a foregone conclusion that we’re going to get tax increases," Cuggino said. "They could be deferred."
Specifically, Cuggino likes Chevron , which yields 4.10 percent, more than the 30-year Treasury, in a sector Cuggino believes will continue to grow.
His other favorites include the real estate investment trust AMB Property, which also yields more than the 30-year, and Air Products and Chemicals, which pays in excess of the 10-year Treasury.
Dietze' Opposing View:
Dietze countered that buying dividend-paying stocks has a been a losing strategy for five years, and he argues investing in these stocks tilts investor portfolios to an antigrowth bias. "Some of the biggest growth stories in the last 20 years have been in health care and technology, where they don’t traditionally pay dividends," Dietze said.
And if taxes do go up, even investors in tax-sheltered accounts can get burned. That's because investors in taxable accounts will pull out of the dividend payers, pushing the yields of those stocks down. "And then you’re going to feel it in your tax sheltered portfolio," Dietze said.
Instead, Dietze said investors should look for companies with a low price relative to sales, profits, and cash flow, and for companies with solid fundamentals and growth potential. He favors:
- Ford and
- Berkshire Hathaway A.
CNBC Data Pages:
Disclosure information was not available for David Dietze or Michael Cuggino or their companies.