The current thinking is that these products (pruning paint or wood dressing) could increase the potential for rot by trapping moisture under the sealant. The best procedure is to make the cut at the collar where the branch meets the trunk and leave the cut area bare. The collar area contains natural chemicals to protect the trunk from invasion by insects and disease. If insects seem to be invading the cut area, then an insecticide can be applied.

The problem often starts in young trees when the collar is pruned off a large limb at the trunk. This leaves the trunk exposed to fungus and insect infestation. The end result is that 20 years later there is a 10 inch hole in the side of the trunk seriously affecting the health and longevity of the tree.

Additional Resource
 

http://edis.ifas.ufl.edu/MG087