Companies Shelling Out Billions to Beat the ‘Fiscal Cliff’

by Patti Domm, CNBC  |  published on November 29, 2012

Companies are racing the clock to hand out billions in special dividends before year end—and some of them are taking on debt to do it.

The latest is Costco [COST 101.77 -0.81 (-0.79%) ], which announced a $7-a-share payout to stockholders Wednesday and is issuing bonds to pay for the $3 billion dividend.

Fearing a tripling of dividend tax rates next year, companies have found one-time payouts and early payments of quarterly dividends as a way to beat some of the impact of the “Fiscal Cliff.”

Taking advantage of super-low interest rates, companies have been issuing debt at a record rate this month. Some say they plan to use the proceeds to fund dividends and share repurchases.

“I think what you’re seeing is a reaction to the lack of clarity around the tax laws, and that’s what Treasurers and CFOs are doing,” said Joel Levington, managing director of corporate credit at Brookfield Investment Management.

Christopher Reich of Thomson Reuters IFR points out, for instance, that Murphy Oil [MUR 57.06 -0.52 (-0.9%) ] in its prospectus Tuesday also said that it would use the proceeds of its more than $600 million offering of 5-year, 10-year and 30-year bonds to fund its previously announced special dividend, among other things.

Read the full article: http://www.cnbc.com/id/49993082

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