Is This The End Of Dividends?
There’s a sneaky trend that’s been filtering through the market in the past few days – have you seen it?
In particular some large-cap, dividend-paying companies have started altering their dividend payout schedule.
Surprisingly these household names are chomping at the bit to pay out money SOONER than later. Sound a little strange? It should. Let’s have a look…
“Imagine for a minute that you come from an incredibly rich family… you’re old money,” Jim Nelson, our in-house dividend expert, wrote to his paid-up readers.
“And let’s say” he continues, “that your money comes from some massive holding in a multibillion-dollar company that your father built. With uncertainty in D.C. today surrounding tax rates, specifically dividend tax rates, you would do everything you could to make sure your next dividend arrived by the end of this year, rather than January.”
The Waltons (heirs to “Wal-Mart” fortune) are in exactly that same boat, Nelson explains.
“The three sons and one daughter-in-law of Sam Walton are worth about $30 billion each — placing them in ninth, 10th, 11th and 12th place on the richest people list. Most of that wealth is still in Wal-Mart Stores Inc. stock” he says.
“So when the board of directors over at WMT decided to move up their (and our) fourth-quarter dividend payment from Jan. 2 to Dec. 27, it made their day.”
Add it all up, Nelson concludes, and if Washington fails to act in the face of the fiscal cliff, the Waltons saved $180 million in taxes!
That’s an impressive move – and Wal-mart isn’t the only company making strange, pre-cliff moves, either….
“You can add Costco to the rapidly growing list of companies instituting special dividends ahead of the looming fiscal cliff” the Wall Street Journal reports.
It’s a sneaky trend to be sure. Frankly, I’m surprised stories like this aren’t making the front page of every newspaper in America.
This trend is also important to our resource holdings. After all, if the general market gets the proverbial rug pulled from under it – something that this dividend action is foreshadowing – many of the plays we cover here on a daily basis stand to be discounted. Short-term commodity prices could fall too.
As I hinted the other day, there’s plenty of ambiguity in today’s market. Your editor, along with any other working class American, doesn’t even know what his paycheck is going to look like come the first payday in January! That’s a mess.
Heh, I wish I could pull my first paycheck forward so I could save a little cash like the Waltons. But alas, I’m at the whims of Congress. And I’d assume you are too.
Heck, just about the only thing you can count on from the government going forward is a continued trend of wasting money and general disregard for YOUR personal well-being. That is, unless you’re on food stamps (a whole different bag of worms all together!)
But that’s the investing climate we find ourselves today. It’s getting scarier by the day, too.
Another Agora Financial stalwart puts it this way:
“We’re in the midst of a general market sell-down” says the intrepid Byron King. “Indeed, it’s fair to say that there’s a perfect storm of market-negative material hitting the walls out there.”
Take a look at Byron’s depressing list on the subject:
- Post-election nervousness about an Obama second term, a Democrat-controlled Senate and a Republican-controlled House. Policy weirdness, higher taxes and political gridlock, anyone?
- The looming, U.S. government fiscal cliff, and large tax increases scheduled to hit the books in 2013. I’ve been writing about this for several months, as my paid-up readers know.
- End of year selling to lock in capital gains (or losses), and/or to avoid next year’s tax increases.
- Continuing weakness in the European economy, with little joy looming for the U.S. economy as well.
- Concern about the decade-long “China Story,” including new, hard-line Leninist-oriented leadership, and investor concern over the lingering slowdown in China’s economic growth.
- Rising tensions in the Middle East. The Islamist revolution proceeds apace, now openly targeting monarchies (Jordan, Saudi, Bahrain, etc.), after taking out a series of old-guard dictators (Tunisia, Libya, Egypt, eventually Syria, etc.). Meanwhile, Israel is shooting back at its opponents in Gaza and Syria, with a war in Lebanon looming, while Iran reliably stirs the boiling pot of troubles.
“I could go on, but surely you get the idea” Byron says.
I sincerely wish I had better news for you, dear reader, but in the short-term I’ve got nothing. (Long-term you can look at Chris Mayer’s recent write-up – for sure, the U.S. is home to vast opportunity in the years to come.)
Today, though, and in the coming 30 days: buyer beware.
“What to do?” Byron King asks rhetorically. “Among other things,” he answers, “stick with short-term cash, long-term precious metals (take delivery!), and investments in high value energy and mineral resources.”
That’s about as solid advice as you’ll find these days.
As usual, I like to keep you abreast as to what I’d do in a situation like this. And today I like the idea of ultra-short-term, dry powder.
The way I see it, there’s not much risk in taking a few bucks off the table here and there, for the next 30-45 days. Clearing up a little pre-cliff cash could put you in position to buy some of our favorite resource plays on the cheap, later down the road.
Keep your boots muddy (and a little of your powder dry),
At The Daily Resource Hunter , we take a fundamentally different approach to research. With our boots on the ground, we travel the world looking for the most lucrative resource, energy, an precious metals opportunities. Each business day we call on our stable of world-class writers and thinkers to show you how to get ahead.
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