Tax Comparison                                             Interest                 Dividends


Investment Amount:                                      $100,000               $100,000

Annual Income:                                              $    4,500               $    3,500

Less Tax Payable @ 31.15%:                           - 1,402                   - 1,581

Plus Dividend Tax Credit                                          0                  + 1,318       

After Tax Income:                                          $    3,098               $    3,237


After Tax Rate of Return:                              3.10%                    3.24%

Equivalent Pre-Tax Interest Rate:                4.50%                    4.70%

                                                                                                          + Growth ?

WEALTH Matters — FALL 2008

One of the most attractive features of owning dividend-paying stocks like BCE is the Dividend Tax Credit which is paid on dividend income. As shown in the table, this tax credit offsets income tax payable, thereby leaving more in your pocket!

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The dividend tax credit

Investors seeking regular income from their portfolio often choose GICs or bonds, or other fixed income investments which pay interest income.  Some stocks also pay income in the form of a dividend. 

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Bce stock buyout

The dividend tax credit

Managing portfolio volatility

Variable annuities

Many of our clients use a Dividend Fund to achieve about a 3.5% dividend yield that is fully eligible for the tax credit. This is equivalent to a 4.7% interest rate, which is higher than current 5-year GIC interest rates.  And the stock portfolio in the fund has the potential to produce tax-deferred capital gains on top of the yield.

A Dividend Fund is a portfolio of dividend-paying stocks managed by a professional portfolio manager.  Not all funds that call themselves Dividend Funds are focused on safety of principal and high yield.  Page and Associates and Worldsource Financial Management Inc. can help you select the best portfolio managers to meet your income objectives.

Also in this issue of Wealth matters:

Bce stock buyout

Managing portfolio volatility

Variable annuities

Mutual Funds and Segregated funds provided by Fund Companies offered through

Worldsource Financial Management Inc. sponsoring mutual fund dealer.

All other services provided by Page and Associates Ltd.



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