Retirees traditionally have moved the majority of their portfolios to stocks, but in light of increasing awareness of the likelihood of a long retirement—coupled with low tax rates on dividends—they are moving more of their money into dividend-paying stocks.
“Equity income is replacing bond income,” Duncan Richardson, chief equity investment officer at Eaton Vance told MarketWatch. “We’re only in the third or fourth inning of the dividend-investing cycle.” In fact, Richardson goes so far as to say that current asset allocation models are wrong.
Since 2003, when the tax rate on dividends was reduced to 15%, $16 billion has flowed into Eaton Vance’s equity income funds. Richardson says that trend should continue into 2007 because stronger financials portend strong corporate earnings; over the next three years, he sees stocks rising 50%.
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