Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
Settings
Settings
Dynamic quotes 
OFFON

MarketScreener Homepage  >  Equities  >  Nasdaq  >  Costco Wholesale Corporation    COST

COSTCO WHOLESALE CORPORATION

(COST)
  Report  
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
News SummaryMost relevantAll newsOfficial PublicationsSector newsAnalyst Recommendations

Investors Could See Bigger Dividends in 2013

share with twitter share with LinkedIn share with facebook
share via e-mail
0
01/08/2013 | 08:58am EDT

--Congress's compromise on dividend tax rates encouraging for companies, investors

--More cash-rich companies could boost payouts

--Without deal, dividends could have been taxed at same rate as regular wages

 
   By Ian Salisbury 
 

Dividend investors came out of the fiscal-cliff deal relatively unscathed, a development some say may spur companies to make bigger payments in 2013.

Investors applauded the compromise in Congress, which kept the dividend tax rate at 15% for most investors. Tax rates for those earning more than $400,000 will jump to 20%. (Added to these rates is a new Medicare 3.8% surcharge for those making $250,000 or more, bringing the top rate to 23.8%.)

That relatively mild increase could encourage more cash-rich companies to boost dividend payouts. Experts say fear of the fiscal cliff had been weighing on corporate executives. Without the deal, dividends could have been taxed at the same rates as regular wages--up to 43.4%. As a result, some companies appeared to rush out payments to avoid a possible tax increase. Costco Wholesale Corp. (COST), for instance, went so far as to borrow $3.5 billion to make a hefty $7-a-share payment. Many feared that other companies that didn't beat the deadline might simply have held off on dividends, finding other uses for their cash instead. "This outcome is the one we'd been hoping for," says Judy Saryan, co-manager of the $1.1 billion Eaton Vance Dividend Builder mutual fund.

In addition to the tax rates being kept low, dividend investors have further reasons to be optimistic, according to Standard & Poor's analyst Howard Silverblatt. Companies in the S&P 500 paid out a record $281.5 billion in dividends in 2012, up 17% from 2011. Silverblatt expects a jump of 3.6% in 2013 based on bigger payments that companies have already committed to but didn't make for the entirety of last year. The financial health of these companies is also encouraging. Payout ratios, the percentage of profits corporations hand back to shareholders as dividends, are only about 36%, well below their historical average of about 52%. "They've got significant cash flow," he says.

Apart from simply avoiding the maximum rate spike, dividend fans also cheered the fact that Congress kept rates level with those that apply to capital gains, a parity established with the 2003 Bush tax cuts. Critics blamed the discrepancy between capital gains and dividend taxes for encouraging corporate executives to focus too closely on their stock's price and not enough on handing money back to investors, leading to everything from the spread of stock buybacks in place of traditional payouts to the aggressive accounting that ultimately led to many of the era's most prominent scandals. "It's important to signal to corporations that dividends should be a strong contender for their cash," Ms. Saryan says. "It gets you back to a traditional type of investing."

Dodging this bullet couldn't have come at a better time for income-strapped income investors. On average, stocks in the Dow Jones Industrial average yield about 2.5%--not much considering annual inflation is about 1.8%. But the Federal Reserve's effort to hold down interest rates means investors have had trouble finding suitable yields elsewhere. One popular alternative, corporate bonds, yield about 2.6%, less than one percentage point above 10-year Treasurys. While bonds tend to be less volatile than stocks, bond investors face losses if interest rates rise, as many think they will sooner or later.

The attraction of dividends versus corporate bonds is one reason the $1.8 billion James Balanced Golden Rainbow fund started snapping up these stocks late last year, according to co-manager, Brian Shepardson. The managers had figured other investors might be overreacting to the risk of a big tax hike. They are also not phased by the smaller one that came to pass when Congress finally struck a deal. "We'll continuing to buy," he says.

Write to Ian Salisbury at ian.salisbury@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

Stocks mentioned in the article
ChangeLast1st jan.
COSTCO WHOLESALE CORPORATION 0.95% 274.1 Delayed Quote.34.55%
DJ INDUSTRIAL 1.20% 25886.01 Delayed Quote.10.97%
NASDAQ 100 1.59% 7604.108768 Delayed Quote.18.33%
NASDAQ COMP. 1.67% 7895.993811 Delayed Quote.17.16%
S&P 500 1.44% 2888.68 Delayed Quote.13.59%
share with twitter share with LinkedIn share with facebook
share via e-mail
0
Latest news on COSTCO WHOLESALE CORPORATI
08/16COSTCO WHOLESALE : U.S. surfboard makers not so stoked about China tariffs
RE
08/14COSTCO WHOLESALE CORP /NEW : Other Events, Financial Statements and Exhibits (fo..
AQ
08/13COSTCO WHOLESALE CORPORATION : Announces Quarterly Cash Dividend
AQ
08/12COSTCO WHOLESALE : Reports july sales results
AQ
08/08WARREN BUFFETT : Kraft Heinz withdraws outlook after dismal results
RE
08/07Costco Wholesale Corporation Reports July Sales Results
GL
08/07GLOBAL MARKETS LIVE : Costco, Booking, CVS Health, Walt Disney….
07/30COSTCO WHOLESALE : goes digital with membership card
AQ
07/24Unilever, Tesco, Nestle ranked top on meat alternatives - report
RE
07/19AMERICAN EXPRESS : Revenue, Profit Rise -- Update
DJ
More news
Financials (USD)
Sales 2019 153 B
EBIT 2019 4 847 M
Net income 2019 3 647 M
Finance 2019 2 702 M
Yield 2019 0,89%
P/E ratio 2019 33,2x
P/E ratio 2020 31,9x
EV / Sales2019 0,77x
EV / Sales2020 0,72x
Capitalization 121 B
Chart COSTCO WHOLESALE CORPORATION
Duration : Period :
Costco Wholesale Corporation Technical Analysis Chart | MarketScreener
Full-screen chart
Technical analysis trends COSTCO WHOLESALE CORPORATI
Short TermMid-TermLong Term
TrendsNeutralBullishBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 30
Average target price 274,00  $
Last Close Price 274,10  $
Spread / Highest target 18,6%
Spread / Average Target -0,04%
Spread / Lowest Target -19,7%
EPS Revisions
Managers
NameTitle
Walter Craig Jelinek President, Chief Executive Officer & Director
Hamilton Evans James Chairman
James Patrick Murphy Chief Operating Officer-International & EVP
Richard A. Galanti CFO, Director & Executive Vice President
Paul G. Moulton Chief Information Officer & Executive VP
Sector and Competitors
1st jan.Capitalization (M$)
COSTCO WHOLESALE CORPORATION34.55%119 412
WAL-MART DE MEXICO S A B DE C V12.19%49 620
TARGET CORPORATION27.42%42 298
DOLLAR GENERAL CORPORATION25.75%34 566
DOLLARAMA INC55.90%11 742
BURLINGTON STORES INC5.82%11 191