Perspectives Blog

New taxes require strategies to maximize after-tax return

Abram Claude, Vice President, Columbia Management Learning Center | March 18, 2014

…the interest from taxable fixed-income securities such as corporate bonds at their marginal income tax rate. For high earners, this could be 33% or 35%. On the other hand, many investors pay tax on income from qualified stock dividends at a far lower 15% long-term capital gains tax rate. Even investors in the highest income tax bracket of 39.6% face a lower long-term capital gains rate of 20%. Given the significant differential in tax treatment,…

Quality milestone in the European recovery story

March 17, 2014

…trategy, December 2013 An increase in average net debt/EBITDA to 2x from the current 1.6x would provide €400 billion of firepower for growth. As with U.S. corporates, the short-term focus is likely to be on share buybacks and dividends rather than increasing capex. But in a low-inflation/low-interest-rate world, pressure for increased capex and M&A is building. The main risk is that turmoil among emerging markets undermines business confidenc…

Q2 fixed income outlook – Hitting for the cycle

Gene Tannuzzo, CFA, Senior Portfolio Manager | March 31, 2014

We have started to reduce exposure to high-quality bonds with limited upside potential and high-yield bonds in which credit risk appears too aggressive. Following weakness last year, emerging market debt has posted gains this year, and we expect further strength ahead as volatility subsides. While we expect a flatter yield curve over the next few months as investors focus on the timing and pace of rate increases, we don’t think they should avoi…

Surveying the landscape for M&A

Robert McConnaughey, Director of Global Research | March 3, 2014

Cash-rich corporations are increasingly considering M&A. The market is rewarding acquirers generously (for now). How can investors position in front of potential M&A without paying an excessive premium that leaves room for disappointment? Cash balances at U.S. non-financial corporations have exploded in the post-crisis era, despite a rising return of cash to shareholders in the form of dividends and share repurchases. One other option…

Rebalancing the U.S. economy

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | January 13, 2014

…al investment growth from near 2% to about 8% this year. The key to getting growth to accelerate beyond 2% is for business to borrow to improve and expand their productive capital, not return it to shareholders in the form of dividends. This capital deepening can begin to close the output gap and is probably what the markets are counting on. We are beginning to see some lift in private sector construction spending on offices, commercial space and…

Trust accounts and the net investment income tax

Abram Claude, Vice President, Columbia Management Learning Center | October 9, 2013

…e reached at a far lower income amount than individual income tax brackets. The same compression is true for reaching the highest general long-term capital gains rate of 20%. In general, trust income (in the form of interest, dividends, ordinary income and capital gains) retained by the trust is taxable to the trust. Distributed income, to the extent it is not a return of trust principal, is taxable to the beneficiary who receives the distributio…

Reinvesting in American business

Robert McConnaughey, Director of Global Research | May 12, 2014

…than 15 years, accelerating in the post-crisis era: U.S. corporations have increasingly embraced a discipline of tight controls on spending and a focus on returning capital to shareholders in the form of share repurchase and dividends. We have long been strong advocates for such disciplines. The financial markets have rewarded the companies which have executed these strategies most rigorously (Exhibit 1) and those rewards have incented an ever i…