Costco announces Special Dividend Prior to Fiscal Cliff

Warehouse merchant, Costco Wholesale has announced it will have a special dividend of $3 billion before the end of 2012, saving its shareholders from being bit should the increase in taxes take place due to the pending fiscal cliff.

The company announced that the dividend of $7 per share is possible because it has a strong balance sheet and good access to capital. The special dividend is in addition to the 27.5-cent regular dividend to be paid out November 30.

Shareholders will be paid the special dividend December 18 to all shareholders of record as of December 10. Because of that, investors will pay the current rate of 15% for taxes on dividends. Taxes are fixed to rise on January 1 due to the fiscal cliff and the new rate for dividends could jump to as high as double for those taxpayers in the high income bracket.

A number of companies including Walmart, have moved their dividend payment that are usually made sometime in January, up to December. However, in the case of Walmart, it was a regular dividend that was moved, not a special on being added.

On the announcement by Costco, shares of its stock shot up 4.7% in trading prior to the opening bell. Costco also announced it experienced strong sales during November and in their just completed quarter, of which included the weekend for Black Friday that generally kicks off the busy holiday period for shopping.

In its stores in the U.S. that have been open longer than one year, sales increased by 6% for both the 12-week quarter and 4-week periods that ended on November 25, when excluding the higher price of gas. Total sales were up 9% to end at $8.15 billion for the four weeks through November 25.

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