Winners and ‘Losers’ of the Special-Dividend Bonanza

Aaron Task
Yahoo Finance

As you’ve probably heard by now, if no deal is reached before Dec. 31, America will go over the “fiscal cliff,” which features big cuts in government spending and a series of tax hikes. Among the levies set to go higher (much higher) are taxes on dividends, where the effective rate would rise to 43.4% for top taxpayers vs. the current Bush-era rate of 15%.

In an effort to preempt such a steep hike in dividend taxes, hundreds of companies have either issued “special” dividends in recent weeks or accelerated dividends originally set to be paid in 2013.

The special-dividend bonanza has been a huge windfall for some corporate insiders, notably company founders such as Oracle’s Larry Ellison, who “saved” a staggering $76.9 million in taxes by taking a dividend this month rather than last month. (The numbers in the accompanying slideshow are calculated based on SEC filing data and shareholders' summaries from Morningstar, as of Dec. 6.)

Clearly there’s an economic incentive for corporations to pay the dividends now vs. taking the risk of a big tax bill later. On the surface, there’s no downside to paying special dividends or accelerating 2013 payments into 2012 – no “losers” in this scenario.

But as my colleague Michael Santoli writes:

The very fact that these companies had stashes of cash sitting on the books that were apparently not needed to run the business, and not earmarked for future growth efforts, raises the question of why the boards weren't paying regular dividends at a higher rate all along, or at least buying back more stock. This underscores one way that family-steered public companies are often too conservative with capital structure and miserly with cash that rightly belongs to all investors. More conceptually, these companies are implicitly telling individual shareholders that their cash can probably get a better return in, say, tax-shielded municipal bonds than by remaining invested in their business.

Taking a (populist) step beyond that, the special tax bonanza also reveals, once again, the folly of calling some companies “public” or “shareholder owned” – unless you’re taking about the insiders, founders and their heirs. Citing Markit, CNBC reports companies paying accelerated or special dividends have an average insider ownership of 27 percent — higher than the broader market.

“There's a school of thought that says managers should return capital to shareholders much more often than they do, in part to avoid spending that money on ill-advised strategies,” says Sydney Finkelstein, a management professor at Dartmouth’s Tuck School and author of Why Smart Executives Fail and Think Again. “One could also argue that they are maximizing shareholder value by paying special dividends, since taxes are likely to go up.”

“Having said all that, it sure looks like insiders are trying to maximize their personal wealth,” he says.

At the end of the day, the avalanche of special dividends is another reminder of a reality that’s so obvious most folks don’t even notice it: Many companies – including some blue-chips – exist largely to serve the interest of a select few individuals, rather than the employees or minority shareholders, much less the community at large.

*Siemond Chan contributed to this report


View gallery

.

AP Photo

Miriam Adelson

Las Vegas Sands Corp. (LVS)

Owner of 289,629,870 shares

Dividend: $289,629,870

After 15% tax: $246,185,389

After 39.6% tax: $162,192,727

Saving: $83,992,662

 

 

 

 


View gallery

.

AP Photo

Larry Ellison

Oracle Corporation (ORCL)

Owner of 1,105,234,580 shares

Dividend: $265,256,299

After 15% tax: $225,467,854

After 43.4% tax: $148,543,527

Saving: $76,924,327

 

 

 

 

 


 

View gallery

.

AP Photo

Sheldon Adelson

Las Vegas Sands Corp.

Owner of 146,955,404 shares

Dividend: $146,955,404

After 15% tax: $124,912,093

After 43.4% tax: $82,295,026

Saving: $42,617,067

 

 

 



 

View gallery

.

AP Photo

Michael Dell

Dell Inc. (DELL)

Owner of 243,349,682 shares

Dividend: $77,871,898

After 15% tax: $66,191,113

After 43.4% tax: $37,067,023

Saving: $29,124,090

 

 

 

 



 

View gallery

.

AP Photo

Joe Ricketts

TD Ameritrade Holding Corporation (AMTD)

Owner of 62,488,814 shares

Dividend: $31,244,407

After 15% tax: $26,557,745

After 43.4% tax: $17,496,867

Saving: $9,060,878

 

 


 

 


View gallery

.

AP Photo

Steve Wynn

Wynn Resorts Ltd. (WYNN)

Owner of 10,026,708 shares

Dividend: $20,053,416

After 15% tax: $17,045,403

After 43.4% tax: $11,229,912

Saving: $5,815,491

    

 

 


 

 

View gallery

.

AP Photo

Jim Walton

Wal-Mart Stores Inc. (WMT)

Owner of 10,499,215 shares

Dividend: $16,693,751

After 15% tax: $14,189,688

Saving: $4,841,188

 

 

 

 




View gallery

.

AP Photo

Michael Duke

Wal-Mart Stores Inc. 

Owner of 1,086,397 shares

Dividend: $1,770,778

After 15% tax: $1,468,265

After 43.4% tax: $967,327

Saving: $500,938

Rates

View Comments (3911)

Recommended for You

  • Billionaire Investor Says Chinese People Work Harder And Western Companies Could Face Deep Trouble After Alibaba IPO

    Michael Moritz, the chairman of VC firm Sequoia Capital, is a huge fan of Chinese internet companies and reiterated his enthusiasm for the Chinese market in an interview with The Wall Street Journal Wednesday. The billionaire investor described the Alibaba IPO as a “major landmark event” that is as…

    Business Insider
  • 1 Tip To Lose Belly Fat

    It's Hollywood's Hottest Diet And Gets Rid Of Stubborn Fat Areas Like Nothing Else.

    AdChoicesagoodcooksSponsored
  • Tycoon buys 30 Rolls-Royces for Macau hotel

    A Hong Kong tycoon has placed the biggest ever order for Rolls-Royce cars, agreeing to buy 30 Phantoms to chauffeur guests at a luxury resort he's building in the global gambling capital of Macau. Stephen Hung's $20 million purchase surpasses the 14 Phantoms bought by Hong Kong's Peninsula Hotel in…

    Associated Press
  • Before You Buy Alibaba, Check Out 4 Top China Stocks

    Before You Buy Alibaba, Check Out 4 Top China Stocks While investors gear up for Alibaba Group 's (BABA) hotly anticipated initial public offering, don't forget about other Chinese stocks that are worth keeping an eye on. Today's Young Guns Screen of

    Investor's Business Daily
  • Only 4 states will see cuts to food stamps

    Cuts to the nation's food stamp program enacted this year are only affecting four states, far from the sweeping overhaul that Republicans had pushed, an Associated Press review has found. As a result, it's unclear whether the law will realize the estimated $8.6 billion in savings over 10 years that…

    Associated Press
  • Play

    Citi, Bank of America Offer Discounted Mortgages

    Citigroup and Bank of America will offer mortgages at discounted interest rates to help borrowers with low incomes or subprime credit. AnnaMaria Andriotis joins MoneyBeat. Photo: Getty.

    WSJ Live
  • "The Retiree Next Door": How successful retirees stretch their savings

    "The Retiree Next Door": How successful retirees stretch their savingsBy the time she hit her late 40s, Toni Eugenia wasn’t sure she would ever be able to retire. Eugenia, 56, a pharmacy technician who lived in Houston, was nearly $200,000 in debt and

    Yahoo Finance42 mins ago
  • SHOE COMPANY: Our CEO Just Disappeared And Most Of The Money Is Gone

    "and like that: he's gone." This is an actual headline from a company press release: "CEO and COO disappeared, most of the company's cash missing." (Via FastFT) In a statement, German-based shoe company Ultrasonic said its CFO,  Chi Kwong Clifford Chan, has been unable to reach the company's CEO,…

    Business Insider
  • Best Womens Wrinkle Creams 2014

    Mom reveals simple wrinkle solution that has researchers very excited. Try this free solution today to look and feel years younger.

    AdChoicesBellaLabs.comSponsored
  • Margaritaville casino owners seek bankruptcy

    The owner of Biloxi's Margaritaville casino has filed for Chapter 11 bankruptcy protection Tuesday, only hours before a hearing where the landlord aimed to seize the property. The filing by MVB Holding LLC in U.S. Don Dornan, a lawyer for landlord Clay Point LLC, said the company had planned to ask…

    Associated Press
  • Here's What Mark Cuban Wishes He Knew About Money In His 20s

    Cuban is the owner of the Dallas Mavericks basketball team. Billionaire investor and entrepreneur Mark Cuban is generous with his advice. When we asked him what he wishes he'd known about money in his 20s, he said:

    Business Insider
  • Apple to unveil new iPads, operating system on Oct. 21 : report

    The company plans to unveil the sixth generation of its iPad and the third edition of the iPad mini, as well as its operating system OS X Yosemite, which has undergone a complete visual overhaul, the Internet news website said. Trudy Muller, a spokeswoman for Apple, declined to comment. The iPad is…

    Reuters
  • Gold loses luster on Fed; Barclays cuts forecast

    Barclays cuts gold forecasts, sees increasingly bearish backdrop Bloomberg MA MB MC MD ME SAN FRANCISCO (MarketWatch) — Gold prices dipped Wednesday on concerns about a stronger dollar ahead of the Federal Reserve policy statement and in response to Barclays lowering its gold forecast.

    MarketWatch
  • Embraer to sell 50 E-175 jets to Republic in $2.1 billion deal

    Brazil's Embraer SA, the world's third largest commercial planemaker, said on Wednesday it booked a firm order from U.S. The deal, which will be included in Embraer's order book for the third quarter, is valued at $2.1 billion, the planemaker said in a securities filing. The planes will be operated…

    Reuters
  • Top Analyst Upgrades and Downgrades: AEP, BHP, GE, Incyte, 3M, Tyco, Under Armour and More

    Top Analyst Upgrades and Downgrades: AEP, BHP, GE, Incyte, 3M, Tyco, Under Armour and More Stocks were firm on Wednesday morning ahead of the FOMC meeting outcome. Tuesday’s rally may have sparked higher interest again, and investors are looking for bargains

    24/7 Wall St.
  • Tired of Living Paycheck to Paycheck?

    New website reveals how to save $1,000's when you're living paycheck to paycheck. See exactly how.

    AdChoices Media ForceSponsored
  • Boeing may have outfoxed Musk, but it could have bigger problems

    Elon Musk is arguably one of the greatest entrepreneurial minds of the 21st Century, but he was outsized an old school aerospace giant. Boeing won the bulk of NASA’s contract for a space taxi.  One of the other companies vying for the deal is SpaceX, the company headed by Tesla’s Musk, will get a…

    Talking Numbers
  • The Government Keeps Helping People Buy Failing Cold Stone Creamerys

    Would you loan someone money to buy a Cold Stone Creamery franchise if you knew that more than a quarter of those loans default? Over the last decade, franchisees in the Cold Stone Creamery ice cream chain defaulted on 29 percent of working-capital loans backed by the government, costing taxpayers…

    BusinessWeek
  • Romney-Sized IRAs Scrutinized as Government Studies Taxes

    The preliminary report attaches data to an issue that drew attention during the 2012 presidential campaign, when Republican nominee Mitt Romney reported an IRA worth $20 million to $102 million. Senate Finance Committee Chairman Ron Wyden said many of these "massive" accounts come from deals…

    Bloomberg
  • Play

    What the Fed Meeting Means for Bonds

    Janet Yellen & Co. are expected to hint at their timetable for raising interest rates. Here's how investors should prepare ahead of the meeting.

    WSJ Live
  • Facebook Is Hiding Important Information From Investors

    Facebook Is Hiding Important Information From Investors Facebook.com/sheryl On July 23, when Facebook reported its earnings for the second quarter, the company stunned everyone. Revenues were $2.68 billion, up 67% from the same quarter during the year

    Business Insider
  • Big Minnesota insurer leaves Obamacare site

    The "Blue Ox" of Minnesota Obamacare is calling it quits. PreferredOne, the insurer that sold nearly 60 percent of all private health plans on Minnesota's Obamacare exchange, on Tuesday said it would leave that marketplace. PreferredOne's plans were the lowest-cost options on that exchange, known…

    CNBC
  • The New 2015 Sonata®: A Step Above the Competition

    There's a Sonata® that's perfect for you, and this is your chance to build it! Visit the Hyundai® Official Site to customize your 2015 Sonata® today!

    AdChoicesHyundaiSponsored
  • Top Analyst Upgrades and Downgrades: Arch Coal, Coca-Cola, Duke Energy, Microsoft, Oracle, Visa and More

    Top Analyst Upgrades and Downgrades: Arch Coal, Coca-Cola, Duke Energy, Microsoft, Oracle, Visa and More Stocks were soft on Tuesday after mixed fanfare on Monday. Investors are still looking for opportunities now that some stocks have pulled back. 24

    24/7 Wall St.