4 Retail Stocks Benefiting From the Fiscal Cliff

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Amid all the handwringing, wailing, and general gnashing of teeth surrounding the fiscal cliff, who would have guessed it could turn out to be a boon for certain investors?

A record number of special dividends
On Wednesday, the Financial Times reported that shares in Costco (Nasdaq: COST  ) rose by 6.3% after the jumbo-portion retailer announced a special dividend of $3 billion, or $7 per share. Why disburse that mighty lump of cash now?

Buried in the so-called fiscal cliff -- a $600 billion combination of tax increases and spending cuts set to hit simultaneously at the end of the year -- is a potential increase in the tax on dividends. If the Bush-era tax cuts aren't renewed, that rate will change from its current 15% to your applicable personal tax rate.

So Costco has joined in what the Financial Times is calling "a record number of U.S. companies [that] have announced special dividends in recent months." Riding Costco's coattails, J.C. Penney (NYSE: JCP  ) gained 4.6%, Saks (NYSE: SKS  ) 4.1%, and Nordstrom (NYSE: JWN  ) 2.4%.

The benefits of shortsightedness and pigheadedness
The reasoning behind the release of these special dividends seems to be plain old goodwill on the part of the participating companies toward their shareholders. One CEO, whose bank was one of the record number of companies paying out special dividends, told the Financial Times: "We've had a great year ... [and] our capital levels are extremely healthy ... I am delighted to do [this] for shareholders." 

And shareholders are delighted they're doing it, which is likely the main reason behind the payments. Companies are well aware that the special dividends portray them as willing to share their wealth and as responsive to shareholders' needs.

Keep an eye out for more companies announcing special dividends in the next few weeks. If their share prices look depressed but the fundamentals look solid, don't be afraid to snatch them up. Chances are, it's market uncertainty over the fiscal cliff that's driving the prices down. And then thank Washington for its mind-boggling shortsightedness and pigheadedness.

Thinking about buying Costco? The warehouse retailer's low prices haven't just benefited customers -- shareholders have benefited, too, with the company returning 11,000% over the past two decades. But with prices near all-time highs, is the ride over for Costco investors? For the answer, check out The Motley Fool's new premium research report, chock-full of in-depth analysis on whether Costco is a buy right now and why. Simply click here now for instant access.

Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2135338, ~/Articles/ArticleHandler.aspx, 10/20/2016 3:46:35 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,168.28 -34.34 -0.19%
S&P 500 2,140.85 -3.44 -0.16%
NASD 5,240.51 -5.90 -0.11%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/20/2016 3:30 PM
COST $150.07 Up +0.62 +0.41%
Costco Wholesale CAPS Rating: ****
JCP $8.67 Down -0.18 -2.03%
J.C. Penney CAPS Rating: *
JWN $53.06 Down -0.37 -0.69%
Nordstrom CAPS Rating: ****
SKS.DL2 $0.00 Down +0.00 +0.00%
Saks, Inc. CAPS Rating: *