Photo: 401(K) 2012 / Flickr
In recent weeks, companies have been unloading tons of cash on their investors in droves in the form of surprise dividends.They’re doing this because if we go over the fiscal cliff, Bush-era tax cuts will expire sending the dividend income tax from 15% to as much as 43%.
Big names offering these special dividends include Costco and Wynn Resorts. Walmart and Oracle are among the companies accelerating dividend payments to beat the potential tax hike.
So, which companies will announce next?
Deutsche Bank’s David Bianco developed a screening process to see which companies are likely to surprise their investors:
We screen S&P 500 non-financial dividend paying stocks on three primary criteria – insider ownership >1%, cash on balance sheet >5%, and domestic sales >50%. Since repatriation taxes need to be paid on foreign profits, only companies with high domestic cash balances are likely to use it to pay a special dividend. We also use two secondary criteria – low net debt to equity, and strong 12 month relative performance vs. the sector. We use all the five criteria to come up with a multifactor score. The screen shows the companies that rank in the top half of the S&P 500 based on the multifactor score. Of the 46 companies that make our special dividend screen five announced a special dividend in 2012
This got Bianco 19 names. By no means is chasing dividends a recommended investment strategy:
Photo: Deutsche Bank
Back in September, Goldman Sachs came up with their own list:
Photo: Goldman Sachs
Markit also had a list: