Fiscal cliff news of the day: Treasury Secretary Tim Geithner will be on Capitol Hill today, meeting with Congressional leaders in an effort by the White House to move negotiations over the fiscal cliff forward. Expect any leak or statement from these meetings to have a ripple effect on stocks today.
The micro view: The fiscal cliff is impacting corporate behavior -- there is no question about it. In this column yesterday, I highlighted the fact that the fiscal cliff is spurring companies to issue special dividends, or to bring dividend payouts forward. Depending on the outcome of negotiations between lawmakers, the dividend tax rate could increase next year from its current level of 15%.
Retailer Costco (Nasdaq: COST ) is getting in on the act, announcing it will return $3 billion to shareholders in a $7 per share special dividend. The dividend will be paid on December 18 to shareholders of record as of the close of business on December 10. Incidentally, Costco is funding this dividend with a $3.5 billion bond issue -- not a bad idea at a time when borrowing rates are at historic lows. The issue has a weighted coupon of 1.16% for a weighted maturity of five years -- nice terms if you can get them.
Costco's management are marvelous allocators of shareholder capital, and the stock's performance reflects this:
That's an impressive long-term record, but two of our analysts recently concluded that "Costco's best years could still be ahead of it." If you'd like to find out why, click here to receive our newly published premium report, which includes 12 months of ongoing coverage.