Moving up dividends to avoid the fiscal cliff


More people apparently think that the fiscal cliff will be avoided.

The markets are less panicked, and the rhetoric emanating from Washington has been encouraging. My sense is that a cliff-avoidance deal will be inked soon, if only temporarily. More companies, however, are hedging their bets a bit by shifting their dividend dates up a little bit, which would allow their shareholders to avoid higher taxes should we go off the cliff.

Reuters notes that Walmart became the biggest corporation yet to move its planned dividend into late December from early January.  The shift by the world's largest retailer will give shareholders a payout of $1.34 billion at the current rate. Fiscal years for retailers typically end in January, so their dividend payments often are timed differently than other companies, many of which were scheduled to pay in December anyway.

Under fiscal cliff rules, the tax rates on dividends will grow from 15 percent for most people to the ordinary income tax rates, the highest of which is 39.6 percent. Other investments are also affected. Master limited partnership ETFs, for example, have predictably been caught in the swirl, given their dependence on dividends.

"The MLP ETF segment seems to have been on the wrong side of this fear induced correction as the ETFs in this space are among the biggest losers in this post-election sell off. Although it must be said that this slice of the market had been enjoying a decent run this year, at least until the election results were out," notes Dow Jones.

For more:
- here's the article
- here's the Dow Jones article

Related articles:
Banks cautious on fiscal cliff


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