Tags: special | dividend | avoid | taxes

Special Dividends Being Issued as a Way to Avoid Higher Taxes

By John Morgan   |   Thursday, 29 Nov 2012 08:20 AM

A increasing number of publicly traded companies intend to issue special dividends to shareholders before Jan. 1, when higher taxes on dividends are set to take effect, The Washington Post reported.

The year-end scramble is evidence the companies want to avoid the fiscal cliff on investors, when the Bush-era tax cuts on dividends are scheduled to expire, the newspaper said.

Markit, a financial data provider, estimated that more than 100 companies have declared special dividends in the fourth quarter, compared with an average of 31, according to The Post. Markit predicted at least 20 more will be announced before Dec. 31.

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

The biggest beneficiaries at many of the companies are families and management. The Markit data revealed that more than half the firms giving one-time payouts next month have insider ownership of more than 25 percent of company shares.

Las Vegas Sands announced it would pay $2.75 a share, at a total of $2.26 billion, next month. The newspaper said about half the stock of the company is owned by CEO Sheldon Adelson and his wife.

“The cash flow of our current operations and the strength of our balance sheet have put us in the enviable position of both returning capital to our shareholders while at the same time staying true to our roots as a growth company,” Adelson said.

Wal-Mart rescheduled its dividend payout from January 2 to December 27, allowing it to avoid the tax increase. The Walton family owns approximately half of the firm’s stock.

Leggett & Platt likewise announced it would move its payout from January to December.

Reuters reported Costco Wholesale announced a special dividend totaling roughly $3 billion, the largest payout so far from any company ahead of the increase in the dividend tax. However, co-founder Jim Sinegal, is the chain's 33rd largest shareholder.

Wall Street Journal columnist Dana Mattioli wrote, “Executives are making a big deal about being generous to shareholders when paying special dividends ahead of the year-end fiscal cliff. But in many cases they’re also being generous to themselves.”

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

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