Wal-Mart Stores Inc. moved its planned dividend into late December from early January to help its investors avoid a possible jump in taxes on shareholder payouts, which is part of the so-called ‘fiscal cliff.’ In the face of looming cuts scheduled to occur January 1st and the possible ensuing tax rate changes, this decision by the board of Wal-Mart may save its shareholders taxes by paying dividends while the upper four brackets’ rate is at 15%. The expiration of the so-called Bush tax cuts would mean a dividend tax increase to 39.6%.
Should Congress and the President manage to negotiate and resolve details of the fiscal cliff conundrum, those who receive dividend payments next year will not be affected. But if tax rate issues are not resolved by the end of December, the Bush era tax cuts will expire and tax rates on investments may increase dramatically. Yahoo Finance reported:
“In light of this uncertainty, the board determined that moving our dividend payment up by a few days to 2012 was in the best interests of our shareholders.”
Oftentimes, the general public think dividends are investment returns only available to the wealthy. Many do not realize their retirement accounts may be invested in the stock market.
Watch as the folks at the Wall Street Journal discuss this.