Four Special Dividends Brought On By the Fiscal Cliff

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Last week, my colleague Chris Preston wrote about all the special dividends companies are offering before the fiscal cliff hits. Since then, even more special dividends have popped up.

The logic behind all these special dividends is simple, really: the fiscal cliff promises to raise taxes on income earned through dividends, so many companies are issuing “special” dividend payments to shareholders before the tax hike takes effect.

January 1 is the day when the Budget Control Act – more commonly known as the “fiscal cliff” – is set to become law. Congress is working on a compromise to avoid the cliff … and we know how long those “compromises” can take.

So in the meantime, publicly traded companies continue to roll out hefty dividends to keep more of the payouts in their investors’ pockets.

Some of these dividends are just earlier-than-usual payouts – companies bumping up their regularly scheduled January or February dividend payment to November or December to avoid the fiscal cliff. Wal-Mart (NYSE: WMT) is one high-profile company that just did it.

Many other companies, however, are issuing one-time “special” dividends that are essentially acting as a bonus to their regular dividend payouts.

Some of the special dividend payers are small- and micro-cap companies you’ve never heard of and probably wouldn’t invest in anyway. So …  

Here are four more recognizable companies whose large one-time payments caught our attention:

  • Costco (NASDAQ: COST): The membership warehouse chain will pay a special $7 dividend on December 18 to anyone who owns shares as of December 10. Since making the announcement last Wednesday, Costco’s stock has shot up 8% to reach a new 52-week high of $104.50 a share.
  • Las Vegas Sands (NYSE: LVS): This large-cap casino operator’s special dividend parallels Costco’s in both issue date (Dec. 18) and shareholder deadline (Dec. 10). At $2.75, the dividend may not rival Costco’s, but it almost triples the company’s regular annual payout of $1.00 per share. Like Costco, LVS shares have climbed roughly 8% since the company announced the special dividend last Monday.
  • DISH Network (NASDAQ: DISH): The digital cable operator announced yesterday that it will pay a special dividend of $1 per share on December 28, payable to shareholders of record as of December 14. This one is unique given that DISH doesn’t offer a regular dividend. However, this isn’t the first special dividend DISH has offered; in fact, its two previous special dividends were double this offering, at $2 per share. So, by comparison, DISH’s latest offering isn’t that special – and investors know it. DISH shares dropped more than 1% on Monday.
  • Wynn Resorts (NASDAQ: WYNN): Here’s another Las Vegas-based company taking a gamble by issuing a huge special dividend. Wynn announced last week that it will pay a special cash dividend of a whopping $8 per share. That amount includes the company’s regular 50-cent quarterly dividend. But the company also announced that it plans to double its regular dividend to $1 per share every quarter, starting next year. WYNN shares have vaulted up 5.7% since the company’s generous dividends were announced.

The month is still young. You can count on Congress dragging its feet right up until the December 31 deadline before it gets a deal done. (Or do you not remember the 2011 debt ceiling fiasco?) The longer the fiscal cliff looms, expect more companies to jump onto the special dividend bandwagon.

So keep an eye out for special dividend payers. The next one could be issued by a company you already own.

If so, consider it an early holiday gift – and savor it. Those dividend gifts might not come so cheap starting next year.

Positions held in companies mentioned above: none

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