Dividend Yields in 2013Submitted by Castlebar Asset Management on December 19th, 2012
Tax rates on dividends are going up in 2013 as part of the expiring Bush tax cuts. This isn’t news to anyone because of the media’s attention to the fiscal cliff. Companies have responded to these tax hikes by issuing special dividends (see Limited & Costco), shifting regular quarterly dividends from January 2013 into this month (Wal-Mart) or moving all of their 2013 dividends into this month (Oracle). In Oracle’s case their Chairman and CEO Larry Ellison will receive $198.9 in dividends. This will save him a a nickel or two on his tax bill.
Investors evaluating companies based on their dividend yields will have to proceed with extra care. Dividend yield data from common sources will have to be scrutinized a little more. A company like Wal-Mart who paid 5 dividends in 2012 may show a higher dividend yield than they actually paid if the data source uses the past 12 months information to calculate the stock’s yield. Dividend data for 2013 will likely understate yields if dividends have been shifted to beat the tax increases. Visiting a company’s investor relations page on their website is a good source for dividend information or verity how your source is calculating their dividend yields.