Special Report: Year End Dividend Moves
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In addition to the traditional Christmas gifts this year, a special present may appear under the tree or stuffed in the stocking of some shareholders and corporate insiders.
So far, a total of 173 companies have announced that they are either moving up or creating a special dividend and will pay it by Dec. 31 in the belief that the dividend tax rate will increase as the result of budget negotiations between Congress and the Obama administration. As I am writing this, there has been little progress made in the discussions.
Costco (NASDAQ: COST) just announced a special dividend of $7 per share payable on Dec. 18 to shareholders of record as of Dec. 10. Instead of using some of the $5 billion of cash on hand, the company will finance the $3 billion payout by issuing bonds. As the result, the ratings agency Fitch has lowered the company's credit rating.
The move will of course benefit shareholders, including members of the Board of Directors, who will rake in a combined total of $29 million and save $8 million in taxes, assuming the top rate rises to 43.5% if a deal is not achieved.
Costco co-founder, board member and former CEO Jim Sinegal stands to receive $14 million based upon the 2 million shares he owns. He will save $4 million in taxes. Mr. Sinegal, an unabashed Obama administration supporter, spoke at the Democratic National Convention this year preaching "tax fairness" and stated that all Americans must "sacrifice" for the good of the country. I guess this is his way of giving back.
Shares skyrocketed higher by 6.3% on the day of the announcement. The stock has gone up by 21% year-to-date. Costco has been increasing its regular dividend at an annual rate of almost 20% over the last few years. It now pays $1.10 a share per year. Earnings have also been growing at a healthy pace.
Las Vegas Sands (NYSE: LVS) announced a special dividend of $2.75 a share, which will also be paid on the 18th. The operator of the Venetian, Palazzo, Marina Bay Sands and Sands Macao casinos decided it didn't want to gamble with shareholders' money next year.
The company stated that it is a priority for them to return capital to shareholders, including through dividends. It will raise its regular dividend next year. Chairman Sheldon G. Adelson, a staunch opponent of the administration and its economic policies, donated large sums of money to GOP candidate Mitt Romney during the campaign. He put his money where his mouth is.
The company has been growing revenue over the last few years. Earnings have been a bit uneven, but the stock price has been slowly recovering from the 2008 financial meltdown. Maybe people finally have a bit of money to put down on the blackjack tables and roulette wheels?
Disney (NYSE: DIS) will pay a dividend on Dec. 28 instead of in January. The company also announced an increase in the annual payment from $0.60 to $0.75 per share. The dividend has doubled over the last decade.
Disney made headlines recently by agreeing to acquire Lucasfilm, the creator of the Star Wars movie series. Its ESPN division has helped drive strong earnings growth this year, and the company is poised for continued future success.
Wal-Mart (NYSE: WMT) plans to move up its normal January dividend into December. Half of the stock is owned by relatives of company founder Sam Walton, so it could be a boon to them. Wal-Mart has been increasing its payout every year since 1982. It has grown annually by 18% over the last eight years.
The company has issued lower guidance going forward but is still hoping for a strong Christmas shopping season. It has been dealing with labor issues and protests since the announcement that stores would open on Thanksgiving night. The stock hit an all-time high earlier this year but has since backed off.
In the event that there is no progress made during the fiscal talks and taxes on dividends rise next year, many shareholders will be happy that some companies opted to pay them earlier. The chaos in Washington might actually create some wealth for a change, at least in the short-term.
Mathman6577 has no positions in the stocks mentioned above. The Motley Fool owns shares of Costco Wholesale and Walt Disney. Motley Fool newsletter services recommend Costco Wholesale and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!