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Stephen Rosenman enjoys analyzing the financial health of companies and pointing out areas the market is either not recognizing or ignoring. A long time investor, I put my money where my mouth is. That's why I'm passionate about my positions. I trumpet companies I believe in and back my articles... More
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Stephen Rosenman
  • Will 2010 be the year of special dividends? 0 comments
    Feb 8, 2010 1:48 PM

      Is the disaster movie 2012 right?  Will 2012 be the year of cataclysmic catastrophe.  No way.  The end of the financial world doesn't start in 2012 but, rather could, in January 1, 2011 if Congress doesn't extend favorable treatments of capital gains and dividends.  That's when the dividend and capital gains taxes are set to revert back to their pre-2003 rates.  For capital gains, that's an ouchy 20%, not fun but survivable.  For dividends, it is the end of the world.  Uncle Sam goes back to taxing them at ordinary income rates, up to 39%.  Unless Congress does something fast, good bye to the quaint notion of dividend paying stocks.  2011, hello, buy backs, growth at any cost, anything but dividends.
         The only thing I see can good about this is the likely rush to special dividends this year.  Before January 1, companies should hand out as much excess cash as they can to their shareholders.  Which ones will give the largesse?  Look for companies with huge insider holdings and excess cash generation to announce massive special dividends.  Management with large stock holdings will recognize that one time only payments make good tax sense.  After all, why not hand it out this year and pay 15% rather than wait and get gouged at 39%? 

    Disclosure: no positions needed

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