Costco’s solution to the fiscal cliff
The fiscal cliff presents a scary scenario for companies going forward, but Costco may have found a solution.
The company announced Wednesday that it will pay a $3 billion dividend before year’s end which will reassure shareholders should taxes rise due to the fiscal cliff.
The $7-a-share payment is possible thanks to a strong balance sheet and good access to capital. The special dividend will be paid on December 18 to shareholders, allowing investors to pay the lower 15% tax rate currently in effect on dividends. After January 1, the rate paid on the dividend could more than double for high income taxpayers.
Costco also announced strong sales for November and the recently-completed quarter, which should also ease shareholders’ concerns.
Costco’s rival, Wal-Mart, is also moving dividend payments into December, but it will just be the company’s normal dividend payment, not a special dividend like Costco’s.
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