Special Dividends in Vogue as Fiscal Cliff Looms

Many companies these days seem to be declaring special year-end dividends.  And the list of businesses doing so is growing like wildfire.
 
Ahead of an expected tax increase in 2013, public companies are doling out early holiday gifts to their shareholders.  The current 15 percent tax rate on dividends could increase to more than 43 percent next year for top wage earners, making special dividends especially attractive to companies and their shareholders.
 
Among the latest on the dividend bandwagon are Disney, which increased its usual year-end dividend by 25 percent, Las Vegas Sands Corp., which nearly doubled its usual year-end dividend, and Costco Wholesale Corp., which declared a $3 billion payout to shareholders.
 
According to Bloomberg, more than 70 companies in the Russell 3000 stock index have announced a one-time cash payment to shareholders since September.  This is up from only 15 businesses in the prior-year quarter.  More than a dozen of the 70 companies the wire service highlighted pegged their actions to pending tax increases, but it’s a good bet that many of the others had similar reasoning.  Investor’s Business Daily reported that as of November 28, 173 companies had announced special dividends in the month of November.  More payouts are expected to occur as we inch closer to the end of 2012.
 
And it’s not just new dividends that are being declared.  Wal-Mart moved the payment of its fourth-quarter dividend from January 2 to December 27, while H.J. Heinz Co. accelerated its payment as well.
 
Some believe these dividend payments could boost holiday retail sales.  Jason Ader, head of Ader Investment Management and a former Wall Street analyst, believes that dividend payments arriving prior to Christmas “may very well help Christmas sales, along with having a multiplier effect in terms of credit and borrowing.”
 
At least one investor, however, does not agree with the recent spate of announcements.  During a recent interview with NPR, Jim Paulsen of Wells Capital Management said that companies should be looking for ways to increase their growth prospects rather than “handing out gifts to shareholders.
 
As companies continue to jump on the proverbial bandwagon and contemplate whether to declare a special dividend, it’s important to remember that each organization’s circumstances are different, and not everyone may benefit from taking the leap.
 
In the interim, maybe we all can take a lesson from Wile E. Coyote.

 

 

Laurie Berman, lberman@pondel.com
 
 

Video: The Next New Thing in Earnings

 
We can’t stress enough the importance of video and its pervasive use in today’s media landscape.
 
Aside from the sharing benefits and vast potential online media pickup, video creates stronger bonds with key audiences.  It’s why we love movies so much.  There’s no other medium that produces the same visceral effect.
 
Publicly traded companies are starting to realize this trend.  Early adopters are using this medium to complement quarterly earnings, embedding video links in press releases as we did for our client (see above), Kirkland-based Market Leader, Inc. (Nasdaq: LEDR).  Done right, videos that accompany press releases of all kinds should be news driven versus corporate slick, delivering more authenticity that is designed for viral uptick.  Other companies that have used video for earnings include DellCitiBASF, and InterContinental Hotels.
 
Leveraging video to communicate financial results can be quite daunting however, especially since these platforms are relatively new to investor audiences.   While the SEC’s Office of Compliance Inspections and Examinations offers guidance on the use of social media for investment advisers, the bottom line boils down to best company judgment, and of course, input from counsel.
 
Professional investors are watching too.  According to a study, 58 percent of institutional investors and sell-side analysts in the U.S. and Europe believe new media will become more important in helping them make investment decisions.
 
There’s no doubt that using social media to communicate to investors remains a fairly prickly topic among CEOs and the investment community.  The reality is that more Fortune 500 companies are blogging, tweeting and utilizing new media platforms to communicate to key audiences in ways never before.  Moreover, engaging in video builds social capital, a valuable network that ultimately enhances reputation, and we believe shareholder value, too.

 

George Medici, gmedici@pondel.com
 
 

PondelWilkinson Wins Two PRism Awards

PRism Awards

 
PondelWilkinson received two PRism awards this week at the 48th Annual Public Relations Society of America – Los Angeles chapter awards show.  The awards recognize reputation/brand management in investor relations for Market Leader, Inc. (Nasdaq: LEDR), a provider of online technology and marketing solutions for real estate professionals, and digital PR tactics/webcasts for Physician Therapeutics, a division of Targeted Medical Pharma, Inc., which is a specialty pharmaceutical company that develops and sells prescription medical foods for the treatment of chronic disease.