When investors consider the potential impact of Donald Trump defeating Kamala Harris, they should not overlook dividend stocks.

First, Trump's reelection means that some things will not happen. Democratic candidate Harris proposed to increase the stock buyback tax from 1% implemented by Joe Biden in 2022 to 4%. From an economic perspective, taxation reduces the number of taxable entities, so the new taxes would suppress stock buybacks. But for now, this doesn't seem to have happened. In 2021,$S&P 500 Index (.SPX.US)$Companies repurchased around $860 billion of stocks, about 50% of free cash flow. In the past 12 months, companies repurchased $960 billion of stocks again, about 65% of free cash flow.

This is good news for investors focusing on shareholder cash returns.

The greater impact on dividend payers comes from Trump's tax policies. He aims to reduce the corporate tax rate from 21% to 15% to increase net income margin. Tax rates may seem like a secondary concern for investors, but dividends are paid from after-tax income, so the lower the tax rate, the more cash can be paid.

Some mathematical analysis: Companies in the S&P 500 index that pay dividends typically allocate around 40% of net income as dividend payments. If the tax rate drops six percentage points, the income and payment amounts could increase by around 7% to 8% under the same conditions. A major caveat of Trump's tax plan is that the 15% rate only applies to domestic production.

因此，特朗普税收计划的最大受益者是拥有大量美国业务的公司。会计专家罗伯特·威伦斯表示，这意味着要关注公司在美国赚取的收入。根据彭博社的数据，小型$Russell 2000 Index (.RUT.US)$中的公司大约有90%的销售额来自北美，而标普500指数中的公司这一比例约为三分之二。

具有吸引力股息收益率的小型股应有望表现优于市场。符合这一标准的三只股票，且华尔街分析师支持的公司包括零售商$Camping World (CWH.US)$和能源公司$Crescent Energy (CRGY.US)$And$Kodiak Gas Services (KGS.US)$The average return for these companies is 3.5%. On Wednesday, when the Associated Press announced Trump's victory, these three stocks collectively rose by nearly 6%.

Investors do not need to screen through thousands of small cap companies in the USA. There are several exchange-traded funds (ETFs) focusing on small cap dividends, including$Wisdomtree Trust Smallcap Dividend Fund (DES.US)$and $O'Shares FTSE Russell Small Cap Quality Dividend ETF (OUSM.US)$ The current yield of these ETFs is approximately 2.6% and 1.3% respectively.

Investors do not necessarily have to invest in small cap companies. Large cap companies may not benefit as much, but will still benefit. The stocks in the S&P 500 index with above-average U.S. businesses and above-average dividend yields include retailers.$Dollar General (DG.US)$and $Target (TGT.US)$Food companies $JM Smucker (SJM.US)$N/A.$Conagra Brands (CAG.US)$And.$General Mills (GIS.US)$distributors $Sysco Corp (SYY.US)$ , cleaning product company$Clorox (CLX.US)$, and $Starbucks (SBUX.US)$.

The average return on this group of companies is around 3.2%, concentrated in the retail and consumer goods industries. Some manufacturing companies with a large amount of domestic production include$Caterpillar (CAT.US)$and$Deere (DE.US)$ and $Boeing (BA.US)$ . However, Caterpillar and Deere have dividend yields below the average level, Boeing stopped dividend payments in 2020. And$Ford Motor (F.US)$Stock returns exceeding 5% and management paid additional special dividends in 2023 and 2024, despite ford motor's potential impact from Trump's tariffs and electric vehicle policies.

It is not easy to precisely calibrate all variables, but lowering taxes for domestic producers will help small companies and their dividends - that should be sufficient.

Editor/Rocky