Then there is the alternative view that the Government will tax dividends increasingly higher. Tax on dividends went from 10% to 15% and is now at 20% - that is it doubled in just over 4 years. As the failures of the current regime is increasinglylaid bare, the population is becoming restless and impatient. The Government's solution to the need for extra money is a desperate scramble via borrowing locally and internationally, and raising taxes. Rather than fix the broken system, they have opted to increase taxes and rates on almost every occassion. The new Radicle Economic Transformation would need to be funded. So would the National Health Fund. Tertiary education would need to be subsidised (those student loans will never be paid back to NaSFAS). More low cost houses will be built by Local Government by increasing rates. The ever increasing social obligations (child grants, feeding schemes at school, and now at Tertiary education facilities) would have to be funded. I get what Simon has said about dividends. They used to historically be an indicator of a healthy company with good investability. Overseas, this is possibly, even likely still the case. In South Africa however, I think an investor needs to be slightly more circumspect. Companies that pay out a dividend have less cash to deploy, and consequently their valuation should be adjusted downwards. Unless you need the income, the after tax cost of dividends to your portfolio may be a drawback. Also, a high dividend yield (for example in the REITs and Property funds) often reduces capital appreciation. In my experience anyway. So be wary. By merely looking at one number (dividend yield), you may get a higher income (and pay more tax), but the capital growth may be stifled. There is lots more I could tell you but...just remember the general investing common sense in South Africa does not hold true in the same way as it does abroad. The same applies to buying residential properties as an investment class. SA operates to a different, artificial set of rules. Captainfrom82
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