'Tis the season to pay dividends.
Some checks will be bigger than normal. Others will arrive earlier than last year.
It could it be that businesses have suddenly turned sentimental and generous, perhaps tipsy from too much holiday cheer.
Ho! Ho! Hardly.
With the end of the year drawing near, cash-flush companies are calculating ways to counteract the uncertainties of 2013.
Some are looking to blunt the federal budget gridlock, aka the “fiscal cliff,” which could trigger sharply higher tax rates on the profits that firms return to executives, directors and ordinary investors.
Others may be reacting to their deeper concerns about the world economy, one stock watcher says.
As of late last week, more than 170 publicly traded businesses had announced higher “special” dividends for the quarter, compared to about 70 last year.
“The sheer number is amazing,” S&P Dow Jones Indices analyst Howard Silverblatt told The Wall Street Journal on Wednesday.
The group includes a few well-known employers in the Charleston region, such as retailers Dillard's and Costco, as well as North Charleston mill owner KapStone Paper + Packaging Corp., which until now has never paid a dividend. Their special payouts announced last week will range from $2 to $7 per share. Employees who own stock in the parent companies are surely cheering the unexpected holiday windfall.
One reason for the year-end largesse is that Bush-era tax breaks, including the reduced rates investors pay on dividend income, will go away next month unless Congress and the president can hammer out an agreement.
Some companies that aren't declaring fat, one-time payouts are instead cutting their normal dividend checks early to ensure shareholders lock into this year's tax rates.
Retail giant Wal-Mart Stores is one example, as is Bank of South Carolina Corp. The tiny Charleston-based lender usually mails out its fourth-quarter checks in January.
“It's one of those little things you can do for your shareholders, said Bank of South Carolina CEO Fleetwood Hassell. “It's not a lot, but if you look at that possible increase on taxable dividends, it will help a little bit.”
University of South Carolina Moore School of Business finance professor Steven Mann attributed much of the spike in special and accelerated dividend payments to businesses that are owned largely by their executives, board members and other insiders. He doesn't blame them.
“That's only being smart,” said Mann, who also lamented that the current federal tax code is forcing companies to take such actions.
Former Charleston-based technology stock analyst Paul Meeks agreed that it makes sense for companies with ample cash reserves to return a healthy slug to shareholders.
“Obviously, some of this is tax-driven,” Meeks said.
But he also suspects more is at play based on the “tons” of CEO conference calls he has listened to as director of institutional investing at Washington-based Saturna Capital. Most disturbing to him is what the world's biggest firms aren't doing with their money.
“They're very worried about taking cash and investing it in property and plant and/or making acquisitions or doing the other stuff they normally do when they have cash,” he said Thursday. “That's because they're so worried about the state of the world.”
The situation remains especially tenuous for huge, multinational firms that have placed large bets in China and India, where growth has slowed dramatically in recent months.
“So there's no longer this growth kicker you had,” he said. “Then you're left with Europe, which is nasty and getting nastier with their sovereign debt and their financial organizations in trouble.”
So what are companies to do amid the otherwise joyous season, aside from offering shareholders a nice cash gift?
“They're still hunkering down,” Meeks said.
Contact John McDermott at 937-5572.