insane dividends

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COSTCO $7
Costco to Pay Investors $3 Billion With Special Dividend
Nov 28, 2012 5:34 AM PT

Costco Wholesale Corp. (COST), the largest U.S. warehouse-club chain, plans to pay a special dividend of about $3 billion as it returns increasing cash to investors.

The $7-a-share payment reflects the company’s “strong balance sheet and favorable access to the credit markets,” Chief Financial Officer Richard Galanti said today as Costco reported a 10 percent increase in first-quarter sales.

Costco joins a growing number of U.S. companies, from Wynn Resorts Ltd. (WYNN) to Tyson Foods Inc. (TSN), which are announcing special dividends at four times the pace of last year ahead of pending tax increases in 2013. The rate on dividends, which was reduced to 15 percent during the George W. Bush administration, is set to go up as President Obama and congress work to draw more revenue from top earners.

Costco, based in Issaquah, Washington, held $3.47 billion of net cash as of September, the most at that point in at least two decades, even after spending about $760 million to acquire the partner in its Mexican joint venture. Galanti said on an analyst call last month that there wasn’t “a great sense of pressure to change our modus operandi” with regard to dividends.
Rewarding Shareholders

“It’s a tangible way of rewarding shareholders that avoids the lottery of a share buyback,” said Bryan Roberts, an analyst at Kantar Retail in London. “They’ve amassed significant cash reserves, partly due to their success. They have been one of the most successful retailers in the past 20 years.”

Costco rose 4.7 percent to $101.05 at 7:25 a.m. in New York. The shares had advanced 16 percent this year through yesterday.

Congress is expected to let the dividend tax rate revert to the ordinary income rate, which tops out at 39.6 percent. From the end of September through today, 71 companies in the Russell 3000 stock index have declared a one-time cash payment to shareholders, up from 15 percent in the year-earlier quarter, according to data compiled by Bloomberg.

Also today, Costco said comparable sales rose 6 percent in the four weeks ended Nov. 25, with growth slowing from 7 percent in the previous month. Excluding the effects of gasoline prices and currency movements, monthly growth was 5 percent, it said, unchanged from October.

The special dividend will be paid on Dec. 18 and is in addition to the regular quarterly cash dividend of 27.5 cents a share that was declared on Oct. 30, Costco said.