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Show Me the Dividends

How can I find out how many consecutive years a company has raised its dividend? A lot of Web sites focus on this subject, but they all charge a substantial amount to view their information. I would really hate to pay for something that I know must be available free somewhere. -- Jim Krueger, Wentzville, Mo.

Your frugality warms our hearts. The best free starting point is the list of "dividend aristocrats" in Standard & Poor's 500-stock index. The list, which currently holds 42 names, shows companies in the index that have increased their cash payouts for at least 25 straight years. The list contains the usual suspects -- Coca-Cola (symbol KO), Exxon Mobil (XOM) and Procter & Gamble (PG), for example -- as well as some stocks that might surprise you. These include insurers Aflac (AFL) and Chubb (CB), uniform-rental service Cintas (CTAS) and VF Corp. (VFC), maker of Wrangler jeans. You can find the list of aristocrats at www.standardandpoors.com (for more about the aristocrats, see James Glassman's column, Opening Shot).

S&P data maven Howard Silverblatt has also compiled a longer, more-targeted list of dividend payers. It contains the 74 companies in the S&P Composite 1500 index that have boosted their payouts for at least ten successive years and generate earnings that are at least twice as great as their dividends. "This is not a 'buy' list," says Silverblatt, "but a starting point for dividend investors" to begin their inquiry into potential winners. The list includes many of the S&P 500's dividend aristocrats, as well as smaller companies, such as Tootsie Roll Industries (TR) and data supplier FactSet Research Systems (FDS). The list appears here (select "market attributes," then "S&P 500 monthly performance data").

If you'd rather not fiddle with individual stocks, consider SPDR S&P Dividend ETF (SDY). You can learn more about this fund in Glassman's column.

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LTC-insurance rate hike

Is it true that John Hancock plans a big premium increase on some of its long-term-care insurance policies? -- M.V., Falls Church, Va.

Yes. John Hancock has proposed increasing the premiums for many of its long-term-care insurance policies by an average of 40%. If state insurance regulators approve the request, the company expects to start sending out notices to policyholders in early 2011 and to start raising its rates in April.

The size of the rate hike may vary depending on your age and when you purchased the policy, says Marianne Harrison, president of John Hancock Long-Term Care. The increase applies to both individual and group policies, with the largest hikes reserved for older policies. The rate increase will not apply to Hancock's Leading Edge or Custom Care II Enhanced policies, nor will it affect the long-term-care program that John Hancock runs for federal employees, which already had a premium increase of up to 25% in the spring.

FSA or child-care credit?

I have to make choices about my employee benefits for 2011 during this year's open-enrollment season. Is it better to pay for child-care expenses from a flexible spending account or to take the child-care tax credit? -- J.M., Philadelphia

If your employer offers a dependent-care flex plan, that's usually a better deal than taking the child-care tax credit. Money you set aside in a flexible spending account not only is deducted from your gross salary before income taxes are calculated but also avoids the 7.65% Social Security and Medicare tax. So if you're in the 15% income-tax bracket, contributing $5,000 to your flex plan (the maximum for most employers' plans) would cut your federal income-tax bill by $1,133 next year. The benefits get better as your tax bracket rises, and you'll save even more if your FSA contribution escapes state income taxes, too. To estimate how much you could save, try the How Much Should I Put in My Flexible Spending Account? calculator.

If you don't have an FSA at work, the dependent-care tax credit can help. It is most valuable for people with very low incomes. To qualify, you must pay someone to watch a child who is younger than 13 so you can work or look for work. Both spouses must have earned income from a job, unless one is a full-time student. You can take a tax credit worth 20% to 35% of the cost of care up to $3,000 for one child or up to $6,000 for two or more children. The higher your income, the lower the credit, bottoming out at 20% for those who earn $43,000 or more. The 20% credit would cut your tax bill by $1,000 if you pay $5,000 in child-care expenses for two kids.

But there is a way to benefit from both options: If you have two or more children and your child-care expenses exceed $5,000 per year, you can set aside up to $5,000 of pretax money in your FSA, then claim the dependent-care credit for up to $1,000 in additional expenses.

Higher Medicare premiums?

What is likely to happen to Medicare premiums next year? I'm wondering whether I will have to pay the high-income surcharge. -- J.F.S., Preston, Conn.

The majority of existing Medicare beneficiaries will see no increase in their Part B premiums, which for most people are $96.40 per month ($110.50 for those who first became eligible in 2010). New enrollees in 2011 may pay a higher monthly premium, and high-income earners will pay a yet-to-be-announced surcharge for Part B in 2011 and, for the first time, for Part D prescription-drug coverage.

The 2011 surcharge is based on your 2009 tax return, which is the most-recent return on record. If your adjusted gross income in 2009 was more than $85,000 if single or $170,000 if married filing jointly, then you'll generally have to pay a high-income surcharge. This year, higher-income people paid $154.70 or more per month for Part B (the charge maxed out at $353 per month for the highest earners). Those surcharges could increase in 2011.

But if your income has dropped since filing your 2009 tax return, you may be able to avoid or reduce the surcharge. To qualify, your income loss must be tied to a life-changing event -- marriage, divorce, a job loss or reduced work hours (including retirement), loss of income from income-producing property, or cuts in pension benefits. You'll need to fill out the Medicare Part B Income-Related Premium - Life-Changing Event form, estimate your income for the year and provide evidence of the change. That could include a statement from your former employer verifying that you've retired.

My thanks to Manny Schiffres for his help this month.

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