NEW YORK, NY -- (Marketwire) -- 12/13/12 -- A dividend tax increase has been a major concern for investors as the upcoming fiscal cliff approaches. Major companies such as Las Vegas Sands and Wal-Mart have declared special dividends or have moved up quarterly dividend payments in attempts to avoid the looming tax increase. According to Bloomberg, from the end of September to mid-November 59 companies in the Russell 3000 stock index have paid special dividends, compared to just 15 one year-ago. Five Star Equities examines the outlook for dividend yielding companies and provides equity research on Microsoft Corporation (NASDAQ: MSFT) and Paychex, Inc. (NASDAQ: PAYX).

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U.S. investors are set to face a dividend tax increase in the New Year. The current top tax rate on dividends of 15%, which was set in the Bush-era, will expire in January. If lawmakers fail to take action dividends will be taxed at the same level as wages and salaries in 2013. President Obama's plan would see the top tax rate on dividends rise to 39.6 percent for high-income earners, which doesn't include the new 3.8 percent tax on investment income added by Obama's health-care law.

"The prevailing fear is that if taxes for dividends increase, dividend yielding companies could grow less attractive and could see a multiple de-rating," said Savita Subramanian, a strategist at Bank of America Merrill Lynch.

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Microsoft currently offers investors an annual dividend of $0.92 per share for a dividend yield of approximately 3.35 percent. The company has recently reported that they have increased production of their Surface tablet, and will soon begin selling them through third-party retailers. "The public reaction to Surface has been exciting to see," said Panos Panay, general manager of Microsoft's Surface project.

Paychex is a leading provider of payroll, human resource, and benefits outsourcing solutions for small- to medium-sized businesses. The company currently offers an annual dividend of $2.64 per share for a dividend yield of approximately 7.80 percent. Paychex's Board of Directors has recently voted to accelerate dividend payments for the third and fourth quarters of fiscal 2013.

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