Any Chance of A Special Divi in Dec. to Beat The Cliff, or It Doesn't Matter?
As the Fiscal Cliff is looming, many companies want to dish out their divi before year-end to avoid the possible divi rate increase next year. Consider that AGNC has a roughly $1.5 per share unpaid divi in hand, is it possible for them to do a special one-time year-end divi, say, $0.50~$1.00, to distribute those unpaid funds out before EOY? Maybe it (the cliff) doesn't matter to AGNC, as its divi has already been paying the regular income tax rate? But even if that's the case, the cliff will raise the income tax rate for many AGNC investors, and so AGNC could do something nice here to keep these investors happy by giving them a special divi so that they don't have to pay higher tax on the divi next year? Any thoughts?
Speaking about special dividends, how about Costco's seven dollar special dividend with a record date of the 10th of Dec? I used to be up on the EX and payable date with special dividends. Isn't it true that they occur at later dates (EX) than the typical two business days before the record?
Because of this(If I remember correctly) the premiums on the Puts are not up by seven dollars currently and further the actual strike price itself(Puts) will get lowered by seven dollars on the EX date. That is why unsuspecting option traders will say things like, "Holy Cow!, I can buy some ATM Puts and score by seven dollars on the EX date" , but sadly wake up on he morning of the EX to find that Santa indeed brought no seven dollar gift because your Long 110 strike Dec Put is now only a 103 Long Dec Put. Did I get that right?
Oddly the co-owner who was one of the crowd supporting Obama and making a speech about sharing the wealth with the middle class, prior to the election, will cash in to the tune of 11 million dollars before the end of the year so he won't suffer the consequences on Jan 1, of not having the Bush dividend break(15%).
He will manipulate the financials, together with the other board members who , in total, will reap another 11 million profit, by borrowing the monies for Costco to underwrite the dividend payout for shareholders. Rather unprecedented, as this will likely lower the credit rating on Costco's debt from AA-, to A+, whereas, recently, their credit rating was being looked at for a possible raise.
I believe he (Sinegal ?) will be taxed at 15% rather than about 45% on the 11million windfall and save about 3 million + dollars, by manipulating his company (through borrowing the money to pay shareholders...himself included) and actually hurting the company's balance sheet.
I think he should donate this 8+ million net profit to the Treasury as a goodwill gesture that he really believes in sharing the wealth as his words stated, when promoting his President. If not, then at least the 3 million dollar difference obtained through the Bush dividend tax savings.
Sorry, no special dividend this year (from retained earnings that will be taxed unles distributed OR spent). AGNC management decided to buy back its own shares at below book value prices with the retained earnings money. Thus, they will have paid out at least 90% of net income (because the buy-back is treated as an expense to earnings) and no income tax will be due.
Management decided that their plan was stronger and better for shareholders than paying a special dividend.
That's true, but the cliff will still raise EVERYBODY's income tax rate, and the divi from AGNC will also pay at a higher rate, right? So, there is still a benefit to the shareholders to dish out the unpaid divi before EOY to beat the cliff. The benefit is not as big as to other regular divi stock holders, whom will see their tax rate change from 15% up to 44%, but a few % savings nonetheless.