Sturm Ruger investors applaud special dividend
Shares of the gun maker trade higher on the announcement of a payout of $4.50 a share -- timed to avoid the dividend tax increase likely kicking in next year.
Sturm Ruger & Co. (RGR) announced Monday that it will pay a special dividend of $4.50 per share on all issued and outstanding shares of common stock. This special dividend will be paid out on Dec. 21 to all shareholders on file as of Dec. 7.
The payout will cost the company about $86.2 million, and comes after a third-quarter report showing 62% earnings growth and 47% sales growth.
"The decision to return this cash to our shareholders was based on an analysis that indicates we can continue to fund our high rate of organic growth, including expected increases in both working capital and capital expenditures, and fund our quarterly dividend while still growing our cash reserves at a modest rate," said CEO Michael Fifer. He added that shareholders' equity will now more accurately reflect the business.
Fifer went on to say that the special dividend represents a positive outlook on new product development and future plans to expand manufacturing operations.
Sturm Ruger traded up 4% Monday following the news of the special dividend. This announcement came after a trading session in which the company had already gained 1.5%. The company has grown 46% since the start of the year, with no break in the action after Monday's latest.
With the dividend, Sturm Ruger becomes yet another company in a fairly long list to recently declare a special dividend. Within the last few weeks, Wynn Resorts (WYNN), Tyson Foods (TSN), Carnival Corp (CCL) and IDT (IDT) all announced plans to pay a special dividend before the end of the year. Wal-Mart (WMT) said Monday it would move the date of its dividend to the end of December from January.
Why the trend? With the fiscal cliff looming, taxes on dividends could go up significantly in 2013. Companies may opt to pay out excess cash now, shielding the money from higher future tax rates.
Firearms competitor Smith & Wesson (SWHC) has also made impressive gains in 2012, including the report of more than a million dollars in sales above estimates. In the wake of Sturm Ruger's announcement, however, Smith & Wesson traded down 1% despite its positive guidance.
Not only has the special dividend announcement made an impact, but it comes on the heels of earning a top industry award, which likely had an effect on trading of the two companies Monday.
Last week, Sturm Ruger earned the Firearms Manufacturer of the Year award, which was given to the company at the 39th annual meeting of the National Association of Sporting Goods Wholesalers. This is the sixth consecutive year in which Sturm Ruger has won the award.
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