For Immediate Release
Chicago, IL – December 11, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Costco Wholesale Corporation (COST), Dillard Inc. (DDS), Walt Disney Co. (DIS), Wal-Mart Stores Inc. (WMT) and Oracle Corporation (ORCL).
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Here are highlights from Monday’s Analyst Blog:
Rush for Dividends or Miss the Bus
The impact of the “Fiscal Cliff” or $600 billion in spending cuts and increase in tax rate on dividend income and capital gains will take its effect from the beginning of 2013 if concrete measures are not taken to avert it. However, Republicans and Democrats still continue to wrangle about ways to find a solution.
Consequently, several companies are contemplating dividend hikes, special dividend and early payouts in light of a probable rise in dividend tax rate from the beginning of next year. These measures are taken to relieve shareholders from the burden of higher taxes. After all, an ounce of prevention is worth a pound of cure.
The tax rate could go up to 43.4% (39.6% top ordinary tax rate + 3.8% Obama’s Medicare surcharge tax on investment income) from the current 15%.
The “Jobs and Growth Tax Relief Reconciliation Act of 2003” is set to expire and renewal of the Bush-regime lower tax rate seems a remote possibility as of now. Thus, companies need to decide if they are ready to dole out dividends now or be prepared to face the brunt of a likely hike in dividend tax rate.
However, the companies have already taken certain shareholder-friendly moves sensing the uncertainty revolving around the economy.
Costco Wholesale Corporation (COST) declared a special dividend of $7.00 per share, amounting to approximately $3 billion to be financed from the proceeds of the $3.5 billion debt-offering. Dillard's Inc. (DDS) declared a special dividend payout of $5 per share, and Walt Disney Co. (DIS) hiked its annual dividend by 25%. Wal-Mart Stores Inc. (WMT) will pay its regular dividend on Dec 27, ahead of its scheduled date of Jan 2, 2013.
Among others, Oracle Corporation (ORCL) will pay dividends for the last three quarters of fiscal 2013 together in advance, aggregating 18 cents a share, on Dec 21.
We believe that if higher dividend tax rates take shape, it will compel investors, who have lately gone overweight on dividend-paying stocks, to reshuffle their portfolios and sell those stocks to avoid paying inflated tax in 2013. Moreover, it is very likely that consumer confidence would also be dented, which the retailers definitely don’t want at the present juncture.
The decision makers should reach a consensus that should not only benefit the economy but investors too. Keeping our fingers crossed...
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