Costco sets special $7 dividend payout

— Costco will spend $3 billion to pay a special dividend of $7 per share next month ahead of higher tax rates expected in January.

Many companies, including Arkansas-based Wal-Mart Stores Inc., Murphy Oil Corp. and Dillard’s Inc., are making special end-of-year dividend payments or moving up their quarterly payouts because investors will have to pay higher taxes on dividend income starting in 2013, unless Congress and President Barack Obama reach a compromise on taxes and government spending.

The Issaquah, Wash., company said Wednesday that the special dividend will be payable Dec. 18 to shareholders of record Dec. 10. In addition, Costco Wholesale Corp. will pay its regular quarterly dividend of 27.5 cents per share Friday to shareholders of record as of Nov. 16.

Costco also said Wednesday that its November revenue climbed nearly 9 percent to $8.15 billion. Revenue from stores open at least a year rose 6 percent. That increase would have totaled 5 percent excluding gains from gasoline price inflation and stronger foreign currencies. Sales were strongest in Texas, the Midwest and the southeastern U.S., as well as Canada and Mexico, the company said on a conference call. Customers snapped up candy, cooler and delicatessen items, and Costco said hardware, health and beauty and women’s apparel categories also performed well.

Several Costco warehouses were closed during part of the month because of power failures stemming from Hurricane Sandy. The company estimated on the call that the storm trimmed 0.5 percent from sales of stores open at least a year. Revenue from stores open at least a year is a key gauge of a retailer’s health because results from stores recently opened or closed are excluded.

Costco’s shares rose $6.07, or 6.3 percent, to close Wednesday at $102.58. The stock has climbed from a low of $78.81 in early January to peak last month at $104.43.

Investors have paid a maximum 15 percent tax on dividends since 2003. But that historically low rate is set to expire in January. Dividends will be taxed as ordinary income in 2013, the same as wages, so rates will go up depending on which income bracket a taxpayer is in. For the highest earners, the dividend rate would jump to 43.4 percent. Even if a political compromise is reached, there’s no guarantee that the tax rate for dividends will remain at its current level.

Costco runs 618 warehouses in several countries, including 447 in the United States and Puerto Rico.

Dillard’s said it will 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.

Wal-Mart’s board of directors voted last week to move up the payment date of the company’s regular quarterly dividend. The date of the 39-cent dividend payment was moved from Jan. 2 to Dec. 27 for shareholders of record as of Dec. 7.

Murphy Oil Corp. sold $1.5 billion worth of bonds to help fund a special dividend and share buyback. The 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.

Business, Pages 28 on 11/29/2012

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