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Payouts hurried to beat tax raise

Arkansas firms also increase dividends

By Jessica Seaman

This article was published November 28, 2012 at 12:03 a.m.

— Publicly traded companies in Arkansas are approving bigger and earlier dividend payouts to shareholders to avoid tax increases that might take effect in 2013.

Dillard’s Inc., Wal-Mart Stores Inc. and Murphy Oil Corp. are among about 66 companies nationwide that have moved up the date or increased the amount of their fourth-quarter dividend payment since the Nov. 6 presidential election, said John Blackwell, managing director of equity trading at Stephens Inc.

Before the election, 37 companies had decided to pay dividends before Jan. 1, he said.

By paying dividends before the year ends, companies will be able to shift millions of dollars back to shareholders before tax rates increase next year — either automatically as Bush-era tax cuts expire or as a result of fiscal cliff negotiations between the White House and Congress.

“A lot of companies are doing that to avoid the potential higher tax rates that could be coming if this fiscal cliff is not dealt with,” Blackwell said. “I think these companies are just looking to reward shareholders so shareholders can keep more of their money instead of the government.”

After U.S. stock markets closed on Monday, Little Rock-based Dillard’s announced in a news release that it would pay a regular quarterly dividend of 5 cents per share and a one-time cash dividend of $5 per share. Both are payable on Dec. 21 to shareholders of record as of Dec. 7.

Julie Bull, spokesman for the company, declined to comment on the dividends as they relate to the fiscal cliff, and referred further questions to a statement by Chief Executive Officer William Dillard II in the news release.

“This special, one-time dividend of $5.00 per share reflects our strong financial position and underscores our confidence in Dillard’s,” Dillard said. “We are pleased to return value to our shareholders in this manner.”

Dillard’s stock hit a 52-week high of $88.71 during Tuesday trading on the New York Stock Exchange. The shares closed at $87.72 in more than twice the average trading volume.

Dillard’s stock price jumped on a day when U.S. stocks indexes fell.

On a light trading day, stocks on the New York Stock Exchange showed little movement until a slight decline about thirty minutes before the close after U.S. Sen. Harry Reid, D-Nev., made a statement that there hadn’t been much progress on the fiscal cliff negotiations, Blackwell said.

The Dow Jones industrial average fell 89.24 points to 12,878.13.

Blackwell said the markets will continue to fluctuate in the coming weeks in reaction to the ongoing negotiations over the fiscal cliff.

If Congress and the White House are unable to reach an agreement, Bush-era tax cuts will automatically expire at the end of the year and rates will go up for most taxpayers — this includes the tax rate on stock dividends, which will be taxed at the same rate as wages and salaries.

The tax on dividends is set to rise from 15 percent to the top income rate for an individual’s income. For high earners, this would mean more than 30 percent, Blackwell said.

Bloomberg News reported Tuesday that Murphy Oil Corp. sold $1.5 billion worth of bonds to help fund a special dividend and share buyback.

The El Dorado-based company will use the money to pay a special $2.50 per share dividend and as much as $1 billion in share repurchases, and for general corporate purposes.

Murphy shares dropped, 83 cents, or 1.43 percent, to close Tuesday at $57.05. The shares rose in after-hours trading.

Wal-Mart preceded Dillard’s in moving up the date of its quarterly dividend payment.

The company’s board of directors voted last week to move up the payment date of the company’s regular quarterly dividend of 39 cents a share.

The dividend payment date was moved from Jan. 2 to Dec. 27 for shareholders of record as of Dec. 7.

Spokesman Randy Hargrove said the company’s board of directors decided the date change was in the best interest of shareholders.

“Wal-Mart’s board recognized that there are fiscal and federal tax-rate issues that may not be resolved in the next few weeks, despite the ongoing good-faith negations going on between the administration and Congress to solve details related to the fiscal cliff,” Hargrove said.

Shares of Wal-Mart fell 41 cents Tuesday to close at $69.50.

The families that founded Dillard’s, Wal-Mart and Murphy still have stakes in the companies, something that could have influenced the dividend payment decision, Blackwell said.

“Companies with high insider ownership, that is something to do with [the decision] because those people are also on the board,” he said.

The three family members who sit on Wal-Mart’s board of directors recused themselves from the dividend vote, Hargrove said.

No matter what happens with the fiscal cliff, Blackwell said, tax rates will likely increase in 2013.

“I would imagine some type of tax hike will still be on the table.”

Business, Pages 25 on 11/28/2012

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