Special dividends

Dividend Stocks 2013: See if Your Favorite Just Raised Its Payout

Roll of bills

An insatiable hunt for yield amid five-plus years of near-zero interest rates has sent scores of investors to dividend stocks.

The shift has led many companies to place a greater importance on dividends. Dividends are now a larger portion of companies' total payouts, ahead of share buybacks, than in past market rallies.

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Don't Miss These Last Special Dividends in 2012

If you missed out on the rush of special dividends in 2012 or simply want to reap further rewards, there's still time to cash in.

That's because even if a fiscal cliff deal is reached, tax rates on dividends will probably still increase. If you add in the investment surtax included in U.S. President Barack Obama's healthcare bill, the top tax rate on dividends could almost triple next year, from 15% to 43.4%.

That is why companies are looking to help out investors in the way of special dividends in 2012.

"Tax rates on dividends are never going to be better," said Steve Joyce, CEO of Choice Hotels International Inc. (NYSE: CHH), on its last earnings call. "I don't know how much worse they are going to get, but they are going to get worse."

Special Dividends in 2012

Special dividends offer investors the chance to cash in on a large dividend payout before it's taxed at a higher rate, plus investors will enjoy higher share prices as special dividend-paying stocks get a bump from the news.

More than 420 special dividends have been announced just in November and December, which will soon exceed the 433 paid in all of 2011, according to S&P Capital IQ.

And it's not just special dividends that are helping investors - regular dividends are being altered as well.

Wal-Mart Stores Inc. (NYSE: WMT) announced its fourth-quarter dividend payout, originally scheduled for Jan. 2, will be paid on Dec. 27, and Costco Wholesale Corp. (Nasdaq: COST) and Oracle Corp. (Nasdaq: ORCL) also moved up their first 2013 dividend payments.

Costco not only paid out its first dividend of 2013 in December, it also issued a $7 per share special dividend, totaling $3 billion, to be paid on Dec. 18.

Wynn Resorts Ltd. (Nasdaq: WYNN) was another company in the past two months to announce a special dividend. Along with Wynn's $750 million dividend, some of the biggest payouts have been Brown-Forman Corp's (NYSE: BF.B) $853 million payout, a $1.1 billion payout by HCA Holdings Inc. (NYSE: HCA) and a $1.6 billion dividend by LyondellBasell Industries NV (NYSE: LYB).

Dozens of other companies have also rewarded shareholders.

"It's like a nice end-of-the-year gift," Jay Wong, a Los Angeles-based portfolio manager for Payden & Rydel, a money manager that manages $75 billion told The Wall Street Journal. "We anticipate that some others will probably issue special dividends before the end of the year, when they get a better sense of what's going to change in the tax structure and they assess their financial health."

So where can investors find the next payout?

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These Special Dividends in 2012 Help Investors Beat the Fiscal Cliff

If the fiscal cliff goes into effect and the president's healthcare bill is upheld, the dividend tax rate could triple next year - which is why companies are looking to help out investors in the way of special dividends in 2012.

Since the end of September to mid-November, 59 companies in the Russell 3000 stock index announced a one-time special dividend, up from about 15 in the same period last year.

And it's not just special dividends that are helping investors - regular dividends are being altered as well.

Wal-Mart Stores Inc. (NYSE: WMT) just announced its fourth-quarter dividend payout, originally scheduled for Jan. 2, will now be paid on Dec. 27.

"It's a foregone conclusion the rates are going up -- it's just a matter of how high they go," Todd Lowenstein, a Los Angeles-based money manager with HighMark Capital Management Inc. told Bloomberg News. "When you know that 15% tax rate is going away and you have excess cash buildup, it makes sense to return some of it back to shareholders now."

As things currently stand, the top tax rate on dividends will go from 15% to 43.4% at the end of the year, causing companies to seriously consider offering a special dividend.

Special dividends offer investors a "twofer": Besides collecting a large dividend payout before it's taxed at a higher rate, investors will enjoy higher share prices as special dividend-paying stocks get a boost from the news.

So where can investors find these special dividends?

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