The great corporate dividend payout stampede

The twists and turns of fiscal cliff budget talks have left the stock market in manic depressive mode with mood swings galore. Just what mix of spending cuts and tax hikes will emerge from the White House budget negotiations is tough to predict, yet this much seems clear: Tax rates on dividends and capital gains are probably going up for those in the higher tax brackets.

If taxes rise as planned at the end of 2012, taxpayers in the top marginal income tax bracket could see the tax on their dividend payments rise from 15% in 2012 to 39.6%.  And that reality has triggered moves by dozens of companies in recent weeks to announce special dividend payouts or move up dividend payout dates to avoid higher tax rates in 2013.

On Nov. 28, big box retailer Costco (COST) announced plans to spend $3 billion for a special $7 per share dividend payout before year-end. The retailer will also borrow $3.5 billion to finance the move, according to the Wall Street Journal. That follows moves by Las Vegas Sands (LVS), retailer Dillard’s (DDS), Walt Disney (DIS) and 100-plus other companies in recent months.

Check out this chart from Bespoke for some other interesting examples:

special dividends

Also, here’s a post I wrote earlier in the month what next year’s tax changes mean for dividend stocks more generally. Short answer: dividend stocks will still be alluring for many investors.