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Yet, the tsunami of announcements since the election makes it obvious that tax rates are impacting next year's taxable payouts (such as in the case of Wal-Mart or Disney prepaying dividends) and has prompted many large special dividends that, if paid out next year rather than this year, would have generated far more revenue for the Treasury.


I think your point about tax rates changing cash allocation decisions is correct, but may be of only minor importance. I guess we'll see what major corporations do with dividends next year, and if they significantly cut dividends, or at least stop raising them, then the point will be supported.

On the other hand, the fact that companies like Walmart move forward the date of an already-scheduled dividend, for instance Walmart advancing its dividend, really says nothing about how future decisions will be influenced by the tax rates.

If anything, I am surprised they haven't just prepaid all of next year's dividends before Jan 31st, which they could do without breaking into a sweat. They could announce that dividends beyond 2013, if any, will be paid after due consideration of total return to shareholders, with alternative uses of cash (primarily share repurchases and debt drawdown, but maybe even reinvestment in their own business, or acquisitions) likely prioritized.

To put it another way, Walmart plans to pay out $1.35 billion in dividends on Dec 27th instead of Jan 2nd, potentially saving its shareholders about $260 million in taxes. But it could also pay out the March dividend now, and save another $260 million. Are they really planning on paying out the same dividend, taxed at 35% instead of 15%? (Of course I am referring to my poor* American friends, but even non-USAians may be partially affected by withholding taxes). If so, then this would be a case against the hypothesis that taxes have a significant impact on investing behaviour. Moving a dividend forward by a week doesn't count.

Regards, DTM
*I am not trying to gloat. While I think the results of the election are regrettable, we Canadians will have our turn in the doghouse soon, with the left-wing Liberals and NDP barking at the Conservatives' heels.
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