Wal-Mart moves up dividend to avoid "fiscal cliff"

(Reuters) - Wal-Mart Stores Inc on Monday became the biggest corporation yet to move its planned dividend into late December from early January to help shareholders avoid a looming jump in the tax rate on payouts due to the so-called fiscal cliff.

The move by the world's largest retailer will give shareholders, including the family of founder Sam Walton, roughly $1.34 billion in total dividend payments taxed at the current rate.

Fiscal years for retailers typically end in late January, so their dividend payments often are timed differently from those of other types of companies. Exxon Mobil Corp, for instance, already planned for payouts in December.

"There are complex fiscal and federal tax rate issues that may not be resolved in the next few weeks, despite the ongoing good faith negotiations between the administration and Congress to resolve details related to the fiscal cliff," Wal-Mart said in a statement.

"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."

Teen apparel chains Hot Topic Inc and The Buckle Inc already said they would move dividends typically paid in January into December to allow shareholders to benefit from the lower tax rate set to expire this year.

Without action from Congress, the dividend tax rate will rise to the ordinary income tax rates, as high as 39.6 percent for top earners. Dividends are now taxed at 15 percent for the top four brackets and zero at the bottom.

In 2003, President George W. Bush and Congress cut taxes on capital gains and dividends, which mostly affect high-income taxpayers. These cuts are set to expire at the end of 2012.

President Barack Obama proposed raising dividend taxes back to ordinary income tax rates in his most recent budget, but many Washington insiders believe if a deal is struck, Democrats will settle on a rate of 20 percent.

Earlier this year, the Democratic-led Senate passed a bill extending the disputed Bush-era tax rates - letting rates for the wealthiest taxpayers go up. But within that legislation, Senate Democrats proposed a 20 percent dividend tax rate - not Obama's preferred higher rate. Add in the new investment tax from Obama's health care law, and dividend taxes would rise to 23.8 percent.

Dividend-paying companies including Altria Group Inc, AT&T Inc and Verizon Communications Inc are among those pressing lawmakers to avoid a tax hike, with executives and surrogates making frequent visits to Capitol Hill.

Wal-Mart Chief Executive Mike Duke was one business leader who met with President Obama on November 14.

"We encourage the White House and Congress to work together on an approach that includes additional revenue, comprehensive tax reform, and spending cuts, including entitlement reforms, to get our fiscal house in order while creating economic growth," Duke said in a statement released by the company after the meeting last week.

WEALTHY WALTONS NOT INVOLVED IN VOTE

The family of Wal-Mart founder Sam Walton owns roughly half the company's shares and probably would pay much higher taxes on dividends paid after December 31 unless Congress takes action.

Two of Sam Walton's sons, Rob Walton and Jim Walton, are board members, and Chairman Rob Walton's son-in-law, Gregory Penner, is also on the board. The Waltons and Penner recused themselves from the board discussion and vote on the dividend date change, Wal-Mart said.

Rob Walton and Jim Walton are the 9th and 7th richest Americans, respectively, according to Forbes. Two other members of the Walton family are also listed in the top 10.

Wal-Mart's board approved changing the payment date of the quarterly dividend of 39.75 cents per share to December 27 from January 2. The record date associated with the payout remains December 7.

Shares of Wal-Mart were up 0.8 percent at $68.58 in midday trading.

(Reporting by Jessica Wohl in Chicago, additional reporting by Kim Dixon in Washington; Editing by Lisa Von Ahn and John Wallace)

Source: http://news.yahoo.com/wal-mart-moves-dividend-avoid-fiscal-cliff-145703687--finance.html

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