A jackpot for dividend investors

Several companies are announcing special one-time payouts or moving their payout dates into December. But there's a flip side to all this largess.

By Kim Peterson Nov 19, 2012 3:40PM
Companies are doling out more cash than a manic Black Friday shopper, hoping to get a jump on dividends before taxes increase next year.

Wal-Mart (WMT) had previously scheduled its fourth-quarter dividend payout for early January, but Monday became the latest company to move the payment into December. The company is expected to offer $1.34 billion to shareholders, Reuters reports. The stock rose about 1% Monday to $68.78.
Several companies are shifting dividends around or announcing special one-time payouts, particularly as it looks increasingly likely that the tax burden for the wealthiest Americans will increase in 2013.

IDT (IDT) canceled a 15-cent quarterly dividend in favor of a 60-cent special dividend this month, Bloomberg reports. Wynn Resorts (WYNN) is giving out a special $750 million dividend this week. Awarding a payout this year before taxes rise could save CEO Steve Wynn some $20 million, The New York Times reports. This month, Commerce Bancshares (CBSH) announced its first-ever special dividend of $1.50 a share. Tyson Foods (TSN) announced its first special dividend since 1977.Image: Woman counting money (Jose Luis Pelaez, Inc/Blend Images/Getty Images)

Other companies moving dividends into December include Hot Topic (HOTT) and The Buckle (BKE).

It's all an attempt to avoid what some are calling the "dividend cliff" -- the prospect of the dividend tax rate going from 15% to as much as 39.6% for the wealthiest Americans.

President George W. Bush cut taxes on dividends and other capital gains in 2003, giving Americans -- particularly the richest ones -- an extraordinary financial break for almost a decade. But those tax cuts are set to expire at the end of the year unless Congress takes action.

Those dividend tax rates are one of the hot topics in the budget negotiations between President Barack Obama and Congressional Republicans. Already, some insiders are talking about a deal that will bring the dividend tax rate to about 20%.

But there's another 3.8% in dividend taxes that will kick in next year. That's because Obama's health care law has a 3.8% dividend tax increase written into it, and with Obama's re-election, that increase is all but a sure thing at this point.

Even though fiscal cliff discussions are ongoing, it's a pretty sure bet that dividend taxes are going up no matter what. And while it may seem like a jackpot for investors now, the flip side of the issue is this: Dividends may dry up next year after the 2012 binge is over.




49Comments
Nov 19, 2012 4:34PM
avatar
What is amazing is that most people think that when the so-called "Bush Tax Cuts" are eliminated, this will only impact the rich. WRONG!  This will raise every tax bracket and impact every person who pays federal income taxes.  Sure, it will impact the rich most... but only because the rich pay the VAST majority of federal income taxes. There is a reason that every group who pays zero income taxes and who are on some form of government entitlement or welfare program, and also those in government unions, ALL voted for Obama.  He is their Santa Claus!  And guess what... the rest of us pay for these great gifts delivered by Baracka-Claus.
Nov 19, 2012 6:25PM
avatar

Countless retired people depend upon dividend income for survival..  Both rich and poor retirees will be hurt by a increase in capital gains taxes.  Really quite sad that people that have invested quietly over 20 or 30 years are now going to be taxed at a higher rate. 

 

 Thaks retirees.  Thanks for busting your butt all those years so you can give more to the Federal Government. 

Nov 19, 2012 4:10PM
avatar

"But there's another 3.8% in dividend taxes that will kick in next year no matter what. That's because Obama's health care law has a 3.8% dividend tax increase written into it, and with Obama's re-election, that increase is all but a sure thing at this point.
Even though fiscal cliff discussions are ongoing, it's a pretty sure bet that dividend taxes are going up no matter what. And while it may seem like a jackpot for investors now, the flip side of the issue is this: Dividends may dry up next year after the 2012 binge is over."

 

If the dividends DRY-UP so will the investors!

THANKS BO-DUMBO!! 

Nov 19, 2012 11:41PM
avatar
Tax all income at the same progressive tax rates and lower all business income taxes to 15%.  Tax all income for FICA, Medicare and Social Security. If you want the benefits then you have to pay for them.
Nov 19, 2012 6:39PM
avatar
So, will the investors who make millions of dollars and pay 15% capital gains tax rate stop investing if the tax rate goes up to 20%?  If so, how are they going to make money, running businesses instead?  I'm not convinced that raising the capital gains rates will significantly reduce investing.
Nov 20, 2012 11:09AM
avatar

It taxes we use to pay(except for maybe the 3.8%) that might be a little burdensome without gains on investments to cover it...?

Sure dividends could dry up...That's always a Board priviledge.

DON'T INVEST IN THOSE COMPANIES...

 

If a Company is making good money and only rewards the Executives...And does nothing for the shareholders or workers...They should go out of business....NOT WORTH THEIR SALT.

Nov 19, 2012 6:33PM
avatar
We conveniently forget that the reason many families don't pay any taxes are because the Child tax credit and the earned income tax credit both passed by republicans.  But never mind just keep talking out you backside.
Nov 19, 2012 10:51PM
avatar
"President George W. Bush cut taxes on dividends and other capital gains in 2003, giving Americans -- particularly the richest ones -- an extraordinary financial break for almost a decade."  Could this be why we are in the state we are in???
Nov 20, 2012 2:51PM
avatar
"V_L I'm trying to follow your thoughts"

I difficult thing for you ADHD types. Would there be a 47% if 53% weren't turning formerly US-employing businesses into cardboard cut-out businesses that drop-ship and administrate? Get off your horse and restore JOBS. Paper and button pushing are Minimum Wage jobs. When you are willing to certify that America is still self-sustaining (instantly), let us know. Stocks are false, currency is fiat, computers are counter-productive when used to control and manipulate. Wisdom says: never let the college kid drive the tractor unless you can afford to fix it and what it destroys. No kidding.
Nov 20, 2012 4:33PM
avatar
"For every action there is an equal and opposite reaction.  Of course raising the dividend tax rate will affect investing.  For every incremental increase in the tax rate there will be a corresponding decrease in investment.  If the tax rate were to climb to 100% then there would be $0 investment."

And? If your publicly traded company mass terminated people, pumped up pay to the deadbeats in the leased office suite, sold the factories, sold the trade secrets, exploited the brand label and was reduced to a market gambling hunk of junk... why would anyone invest in it? Getting ride of the dividend stops otherwise sensible people from looking at your business like it actually is one. The days of smoke and mirrors are over. Where are you going to go now that you've screwed the whole world? Do you know what the reaction is- to the action of folding cardboard cut-out businesses up? It's re-employing America and reducing the paper pusher to the lackey not the CEO. Administrators who can start up and operate successful enterprises that aren't in money handling, paper or button pushing or consulting... make good test animals in the labs.

Nov 20, 2012 7:34PM
avatar
I for one will will sell my stocks for a better ROI  wheather its real estate or loaning my money at a  high interest rate. Theirs always someone looking to borrow and as long as i can make 8 to 12% on a deal im happy.
Nov 20, 2012 2:05PM
avatar
The last line of the article shows the Author doesn't invest.  Payed dividends are typically reinvested creating additional "free" shares for the future.  Even with decreased dividends...the additional shares will earn those too making up most of the difference in the payout reduction.
Nov 20, 2012 12:51PM
avatar

Taxes on capital gains?  Oh boo hoo, boo hoo.  Ok, let's take a look at investing and capital gains.  IF a person invested in an existing company/stock how have they helped the economy, nada, nope, none and  zip.  But they say, "I bought stock and invested in ABC company, I helped them grow and expand"  No you didn't, you invested  in a stock only to make money. (Nothing wrong with that)  Only if you invested in an IPO did you invest DIRECTLY in a company.

You go to work to make money for the day to day expenses of life and hopefully, a bit left over to "invest" whether it's a stock for ABC company, an IPO, a savings account, pre-paid college tuition for your kid or even to pay down your mortgage.  If you make a paycheck you pay taxes.  It's that simple.  If you go to the race track and win more than $600.00, you pay taxes.  If you buy a stock and sell it at a profit/gain, you pay taxes and since the gain is "free money" why shouldn't you pay taxes at a higher rate.  Come on,  Even if the rate is 30 or 36%, you still have 70 or 65% left over to go to the race track and blow it all.

Don't forget, If you have losses in the market, selling at a loss, you can offset any gains by the amount of losses.

As I said above, capital gain taxes?  Boo hoo hoo.  Man up, (sorry ladies) pay up, shut up and get a life!

Nov 20, 2012 8:45AM
avatar

How to lose your assets in less that 45 days: There are less than 45 days left before Year End. The Fiscal Cliff looms and publicly traded companies who lived fully off stock activity are preparing one last dividend offering before the bottom falls out. Which comes first- payment of the dividend or bankruptcy filings? When a business announces a dividend sharing, it says "shareholders on day XX of record will be paid on day XX". With the exception of yesterday's criminally-orchestrated market pump, markets have been steadily declining since Election Day. Layoffs and terminations have been increasing. The 3rd quarter was dismal. The big events of the 4th quarter aren't building any momentum. It is very likely that dividend qualification day occurs on a downward slope. Shorters would have that covered and literally cause a stock price to fall below the value of the dividend. The next day of course, dividend w.hores sell out and cause that stock to collapse entirely. Shorters get paid first because there is no delay like the dividend so by the time dividend payout day arrives... it could come a day and dollar too late. The kicker... a great deal of this activity will come from two sources-- illegal offshore (dark) and super computerized funds. The very real potential exists that around or on 12/21/12, combined computerized and adverse influences wipes out the financial sector completely. Not a fantasy... consider the aspects and manipulation culminating in a single bad trade/sale day. BOOM... Wall Street is out of business.

Laugh it off now. Fools always do. I may not be Roubini but we tend to arrive at the same answers fairly often. Too many on the deck, all leaning in the same direction. No economy in offset. Gravity. It's not rocket science, just commonsense. When YOU are broke, it's the shelter not bail, ahead.

Nov 19, 2012 10:15PM
avatar
Is it a dividend pay out or blow out? GREED will force the pay outs, followed by a sell off of stocks and collapse of those cardboard cut out businesses (because they have lived vicariously from financial tricks for 4+ years now). The financial collapse compromises not just us, but most of the global pariah who live off dividends. Seniors will need to dip into the stash, hoarders will as well but this could get good because they are clueless about normal living. There will really be no better time than now to toss the boss out the window and buy up what's left for pennies and reconstruct businesses that work and are good for ALL America. I'd call it a blow out of the financial dam and pariah who damned us to live impoverished in our own country. I think your cursing of Obama will be suppressed by the calling out of a Party of NO in Congress and subsequent trial. This is AMERICA folks... we drink Kool Aid not live it.  
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

129
129 rated 1
281
281 rated 2
444
444 rated 3
732
732 rated 4
629
629 rated 5
623
623 rated 6
610
610 rated 7
440
440 rated 8
303
303 rated 9
126
126 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
BBBYBED BATH & BEYOND INC10
TWXTIME WARNER Inc10
COPCONOCOPHILLIPS9
HDHOME DEPOT Inc9
VZVERIZON COMMUNICATIONS9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.