Salient to Investors:
Companies are paying special dividends at four times the pace of last year with rates poised to jump in 2013. The calendar is influencing even the payment of regular dividends. Dividends are regaining popularity after falling out of favor in the 1990s.
Todd Lowenstein at HighMark Capital Mgmt said it’s a foregone conclusion the rates are going up, so it makes sense to return some of it back to shareholders now.
Ron Graziano at Credit Suisse said investors see dividends as a counter to sluggish earnings growth and low fixed-income returns. A special dividend is a good tool for reducing companies’ cash holdings because it doesn’t commit the company to a regular payout. Including additional levies related to health-care reform, the rate on dividends would reach about 44.3 percent in the highest tax bracket.
David Bianco at Deutsche Bank said industries that pay the highest dividend rates, including utilities, telecom and health care, will be most affected by a higher tax rate,
James Paulsen at Wells Capital Mgmt prefers companies to invest their cash to boost earnings – if the best they can do is pay out dividends ahead of the tax code, then that says something about their future opportunities.