This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stock Under $10 that he thinks could potentially double or triple in the next 6 to 12-months. See what he's trading today with a 14-day FREE pass.

Looking for a Shower of Dividends

Stocks in this article: DELLGOOGSMRT

When it comes to the cash payout of special dividends, prolonged shareholder activism is usually what gets the job done -- and over the coming weeks and months, investors may be treated to cash payouts thanks to the activist hand of none other than Uncle Sam. The catalyst, of course, will be the expectation of higher taxes. Any business that is sitting on a pile of cash and has even the slightest inkling of paying out a dividend has every incentive to do so now rather than later.

As things now stand, the tax rate on dividends is set to increase dramatically on Jan. 1, 2013. If a company is harboring a payout, it has every incentive to announce and make that payout by year-end. As a result, in the next two months the market could perhaps see a flurry of special-dividend announcements. If the dividend tax rate does increase, a dividend-paying company could hike the year-end dividend in lieu of gradual increases next year. My assumptions are purely speculative, but no one can deny that both corporations and their investors would be better served by paying dividends today rather than waiting until 2013.

Take Dell (DELL), for example, which today trades for under $10 a share. The balance sheet reveals that the company has $7.80 in cash per share. Annual free cash flow per share, while currently in decline, is around $2 per share. Dell actually started paying its first-ever regular dividend of $0.08 a share in the third quarter.

Still, the company generates more cash than it needs. Founder and CEO Michael Dell has personally bought hundreds of millions of dollars worth of stock for himself since he reassumed his role as CEO. Shares have been trickling lower all year, and today they sit near a 52-week low of $9.80. CEO Dell would personally reap millions of dollars in tax savings from any additional dividend income. So what better way to reward shareholders, including himself, than by paying a special dividend this year?

Other cash-stuffed companies, such as Microsoft (MSFT) and Google (GOOG), are also ripe for a one-time special dividend. Google remains the last tech giant without any form of dividend payout, and this company certainly pulls in more cash than it needs to run and grow its business. Google insiders also own a sizeable chunk of stock, putting them first in line to benefit not only from a dividend, but from the tax savings as well.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV

Markets

DOW 17,828.24 +0.49 0.00%
S&P 500 2,067.56 -5.27 -0.25%
NASDAQ 4,791.63 +4.3130 0.09%

Our Tweets

Brokerage Partners

Top Rated Stocks Top Rated Funds Top Rated ETFs