(For other news from Reuters Global Investment Outlook Summit,
By Ellen Freilich
NEW YORK Nov 30 NEW YORK, Nov 28 (Reuters) -
They might not arrive in pretty wrapping paper with a bow, but
dividends paid out early to avoid a potential tax increase next
year could provide an unexpected boost to holiday sales.
With tax rates on dividends set to more than double for many
earners in 2013 if Congress does not reach a deal on the
so-called fiscal cliff of tax increases and budget cuts, several
companies are trying to get special dividends in "under the
wire," notes Citigroup credit strategist Erin Lyons.
For most companies, special dividends are simply a shrewd
business move designed to beat the tax man. But those dividends
could also, at least marginally, further brighten the outlook
for holiday shopping by putting more money in the pockets of
Money in the form of dividend payments that arrive before
Christmas, instead of early next year, "may very well help
Christmas sales, along with having a multiplier effect in terms
of credit and borrowing," said Jason Ader, who runs New
York-based investing firm Ader Investment Management and is a
former Wall Street gaming analyst.
"Retailers have done an excellent job managing inventories
so with the stimulus effect of the early dividends and good
inventory management, it should be a pretty good season for
retail," said Ader, who sits on the board of Las Vegas Sands
, one of the companies paying a special dividend before
the start of the new year.
Speaking at the Reuters Global Investment 2013 Outlook
Summit, Ader said the holiday shopping season should be positive
for retailers separate from the early dividend payouts because
consumers are generally feeling better about the economy.
In fact, surveys show consumer confidence is at its highest
since early 2008. A big reason for that is that consumers' views
of current and expected employment conditions have improved,
says Ray Stone, economist and managing director at Stone &
McCarthy Research Associates in Princeton, New Jersey.
Household balance sheets have also strengthened since the
depth of the financial crisis.
"Equities are up, home prices are up, and gasoline prices
are down so consumers' net worth and real incomes have risen,"
said Steven Einhorn of the investment firm Omega at the Reuters
Global Investment 2013 Outlook.
The National Retail Federation said sales for the four days
from Thanksgiving to Sunday rose 12.8 percent from the same
period last year, well above the 4.1 percent gain the trade
group expects for the whole season.
Retailer Costco Wholesale Corp said on Wednesday it
would pay a special dividend totaling roughly $3 billion, the
largest payout so far from any company ahead of the possible
increase in the U.S. dividend tax.
Several companies declared one-time cash payouts this week
before the possible increase in the dividend tax rate.
Las Vegas Sands Chairman Sheldon Adelson, a billionaire
Republican donor, announced a special dividend totaling about
$2.27 billion, based on the number of shares outstanding as of
Sept. 30. More than half of that sum will benefit Adelson and
Department-store operator Dillard's Inc announced a
special dividend of $5 per share and spirits company
Brown-Forman Corp declared a $4-a-share special
Family members are three of the top 11 shareholders at
Dillard's and two of the nine largest Brown-Forman shareholders
are affiliates of the Brown family.
Wynn Resorts Ltd paid a dividend of $8 per share,
including a regular 50-cent payout, in early November, ahead of
the possible tax increase. Chief Executive Stephen Wynn and his
ex-wife, Elaine, each individually own nearly 10 percent of the
On Nov. 19, Costco's biggest rival, Wal-Mart Stores Inc
, moved its planned dividend to late December from early
January to help shareholders avoid any increase in the tax rate.
The family of founder Sam Walton owns just over half of the
Some analysts believe giant tech companies with a lot of
cash on their balance sheets could be next to offer early
(Additional reporting by Jessica Wohl; Editing by Steve