Obama's Costco cronies borrowing cash to pay themselves fat dividend.

[cleller]

In a nutshell Costco has borrowed money to pay shareholders a big dividend now, before Obama's big hikes in capital gains takes effect. Costco Chairman Jim Sinegal is an Obama supporter. From the article:

When President Obama needed a business executive to come to his campaign defense, Jim Sinegal was there. The Costco COST +2.00% co-founder, director and former CEO even made a prime-time speech at the Democratic Party convention in Charlotte. So what a surprise this week to see that Mr. Sinegal and the rest of the Costco board voted to give themselves a special dividend to avoid Mr. Obama's looming tax increase. Is this what the President means by "tax fairness"?
One of the biggest dividend winners will be none other than Mr. Sinegal, who owns about two million shares, while his wife owns another 84,669. At $7 a share, the former CEO will take home roughly $14 million. At a 15% tax rate he'll get to keep nearly $12 million of that windfall, while at next year's rate of 43.4% he'd take home only about $8 million. That's a lot of extra cannoli.
To sum up: Here we have people at the very top of the top 1% who preach about tax fairness voting to write themselves a huge dividend check to avoid the Obama tax increase they claim it is a public service to impose on middle-class Americans who work for 30 years and finally make $250,000 for a brief window in time.

(end)
http://online.wsj.com/article/SB10001424127887324705104578149012514177372.html?m od=WSJ_Opinion_LEADTop
Good example of the super rich exploiting circumstances to further enrich themselves. Seems like the kind of stuff Obama and his supporters are always fighting against. Good ole Joe is even there to keep it all chummy.

[pphilfran]

The company is in business to make money for the shareholders and paying the cap gains in a low interest rate environment is what they should do for the shareholders...if the company did not do this they would not be doing their shareholders their due...

Nothing to see here...

[cleller]

The company is in business to make money for the shareholders and paying the cap gains in a low interest rate environment is what they should do for the shareholders...if the company did not do this they would not be doing their shareholders their due...

Nothing to see here...

Nothing to see if you want to shield your eyes from the two-face approach of Obama's supporters. Wonder what would happen in Romney tried this?

"More striking is that Costco also announced that it will borrow $3.5 billion to finance the special payout. Dividends are typically paid out of earnings, either current or accumulated. But so eager are the Costco executives to get out ahead of the tax man that they're taking on debt to do so."

Doesn't sound like business as usual to me. Especially from a businessman who purports to share Obama's views of tax fairness. Sure its good for shareholders, if I were a shareholder, I'd applaud the idea. But to borrow in order to pay now is purely to avoid Obama's taxes.

Its the two face thing. "This is what you should do, but not me". He supports Obama's ideas until they are going to cost something.

Finally, look at the Costco dividend history. Costco has never done anything remotely like this before:
http://www.nasdaq.com/symbol/cost/dividend-history

This dividend is 25 times higher than any dividend still tracked by NASDAQ. Like I said, purely to escape Obama's grand ideas. An probably the biggest beneficiary is Sinegal, who stumped for Obama at the convention.

[RUSH LIMBAUGH is my clone!]

In a nutshell Costco has borrowed money to pay shareholders a big dividend now, before Obama's big hikes in capital gains takes effect. Costco Chairman Jim Sinegal is an Obama supporter. From the article:

When President Obama needed a business executive to come to his campaign defense, Jim Sinegal was there. The Costco COST +2.00% co-founder, director and former CEO even made a prime-time speech at the Democratic Party convention in Charlotte. So what a surprise this week to see that Mr. Sinegal and the rest of the Costco board voted to give themselves a special dividend to avoid Mr. Obama's looming tax increase. Is this what the President means by "tax fairness"?
One of the biggest dividend winners will be none other than Mr. Sinegal, who owns about two million shares, while his wife owns another 84,669. At $7 a share, the former CEO will take home roughly $14 million. At a 15% tax rate he'll get to keep nearly $12 million of that windfall, while at next year's rate of 43.4% he'd take home only about $8 million. That's a lot of extra cannoli.
To sum up: Here we have people at the very top of the top 1% who preach about tax fairness voting to write themselves a huge dividend check to avoid the Obama tax increase they claim it is a public service to impose on middle-class Americans who work for 30 years and finally make $250,000 for a brief window in time.

(end)
http://online.wsj.com/article/SB10001424127887324705104578149012514177372.html?m od=WSJ_Opinion_LEADTop
Good example of the super rich exploiting circumstances to further enrich themselves. Seems like the kind of stuff Obama and his supporters are always fighting against. Good ole Joe is even there to keep it all chummy."Do as I say, not as I do." -anonymous democrat.

[RUSH LIMBAUGH is my clone!]

Nothing to see if you want to shield your eyes from the two-face approach of Obama's supporters. Wonder what would happen in Romney tried this?

"More striking is that Costco also announced that it will borrow $3.5 billion to finance the special payout. Dividends are typically paid out of earnings, either current or accumulated. But so eager are the Costco executives to get out ahead of the tax man that they're taking on debt to do so."

Doesn't sound like business as usual to me. Especially from a businessman who purports to share Obama's views of tax fairness. Sure its good for shareholders, if I were a shareholder, I'd applaud the idea. But to borrow in order to pay now is purely to avoid Obama's taxes.

Its the two face thing. "This is what you should do, but not me". He supports Obama's ideas until they are going to cost something.

Finally, look at the Costco dividend history. Costco has never done anything remotely like this before:
http://www.nasdaq.com/symbol/cost/dividend-history

This dividend is 25 times higher than any dividend still tracked by NASDAQ. Like I said, purely to escape Obama's grand ideas. An probably the biggest beneficiary is Sinegal, who stumped for Obama at the convention.If Sam's Club opened a store anywhere remotely close to me, I would drop COSTCO membership in a heartbeat. I don't like supporting them, but it makes personal expenditures/economic sense to do so.

[pphilfran]

Nothing to see if you want to shield your eyes from the two-face approach of Obama's supporters. Wonder what would happen in Romney tried this?

"More striking is that Costco also announced that it will borrow $3.5 billion to finance the special payout. Dividends are typically paid out of earnings, either current or accumulated. But so eager are the Costco executives to get out ahead of the tax man that they're taking on debt to do so."

Doesn't sound like business as usual to me. Especially from a businessman who purports to share Obama's views of tax fairness. Sure its good for shareholders, if I were a shareholder, I'd applaud the idea. But to borrow in order to pay now is purely to avoid Obama's taxes.

Its the two face thing. "This is what you should do, but not me". He supports Obama's ideas until they are going to cost something.

Finally, look at the Costco dividend history. Costco has never done anything remotely like this before:
http://www.nasdaq.com/symbol/cost/dividend-history

This dividend is 25 times higher than any dividend still tracked by NASDAQ. Like I said, purely to escape Obama's grand ideas. An probably the biggest beneficiary is Sinegal, who stumped for Obama at the convention.

The company has 432 million shares outstanding...the dividend will benefit the many shareholders other than Sinegal...

This is exactly what companies are expected to do...maximize shareholder value....they would be doing their shareholders an injustice if they failed to take advantage of the situation...

When cap gains rates were increased in 1987 realized cap gains more than doubled the prior year....

When cap gains rates were dropped in 1997 and 2003 you can see that realized cap gains nearly doubled the years immediately after the decrease...

This is nothing new and should not be a surprise to anyone....

From the link you provided look at Apple...they haven't paid a dividend since 1995 when they paid 12 cents a quarter...now this year they are paying out $5.30...

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=161

[pphilfran]

There are many things you should and could be outraged about...but this ain't one of them...

[bluedogok]

Good example of the super rich exploiting circumstances to further enrich themselves. Seems like the kind of stuff Obama and his supporters are always fighting against. Good ole Joe is even there to keep it all chummy.
Businesses and the rich exploit all the rules in place and lobby to have rules favorable to them or their businesses enacted no matter which party is in power. Corporate welfare and exploitation is alive and well because both political parties are bought and paid for. The "class warfare" rhetoric is just that, something to pacify the masses and make them think they are actually for them enough to keep their vote. in others words, business as usual...

[cleller]

There are many things you should and could be outraged about...but this ain't one of them...

Well now, I'm glad to know that. That could have come right from a George Orwell novel.

Sure, its good business. Its such good business, that you have to ask why they need to do it in the first place? Do this mean raising the capitol gains tax is a bad business?
The Costco guy is making money now, so he does not lose it under Obama. Getting theirs NOW, because his candidate is making the future less profitable. But that doesn't matter to him, because he'll get his money now, screw the future. "Spread it around"? That's for suckers. Obama's policies are fine for him, but its better business to avoid them right now.

If there were better prices at Sam's should the Costco guy shop there? Just good business. Fits with his style.

[Turd_Ferguson]

Noticed the msm following jack off joe around costco yesterday...hmmm

[TheHumanAlphabet]

If Sam's Club opened a store anywhere remotely close to me, I would drop COSTCO membership in a heartbeat. I don't like supporting them, but it makes personal expenditures/economic sense to do so.


You do know that the owners of Wally world are also big donors to The Socialist. I avoid those stores like the plague.

[Soonerjeepman]

The company is in business to make money for the shareholders and paying the cap gains in a low interest rate environment is what they should do for the shareholders...if the company did not do this they would not be doing their shareholders their due...

Nothing to see here...

agree it's business...but sooo 2 faced...THAT is the issue. To believe the dems are any more for the people than the pubs is a joke.

[RUSH LIMBAUGH is my clone!]

You do know that the owners of Wally world are also big donors to The Socialist. I avoid those stores like the plague.You know about protection money, right. I get the impression from other Walmart activities I have heard about that Walmart is not philosophically in the tank with the socilists, but that COSTCO is much more so. Both stores provide low costs for their items, usually, and is why both of them sell lots of stuff.

[BermudaSooner]

http://www.soonerfans.com/forums/showthread.php?174230-Dems-Good-for-you-just-not-good-for-me

Whereas I can't speak to whether it makes sense to get your company downgraded to do it (leading to higher borrowing costs and such), it does make sense to Costco shareholders--especially if the majority of shareholders are wealthy and this is a big tax save. The issue is that a Democrat arguing the rich should be paying more is a hyprocrite in this case.

[RUSH LIMBAUGH is my clone!]

http://www.soonerfans.com/forums/showthread.php?174230-Dems-Good-for-you-just-not-good-for-me

Whereas I can't speak to whether it makes sense to get your company downgraded to do it (leading to higher borrowing costs and such), it does make sense to Costco shareholders--especially if the majority of shareholders are wealthy and this is a big tax save. The issue is that a Democrat arguing the rich should be paying more is a hyprocrite in this case.D'Oh!!!

[pphilfran]

Well now, I'm glad to know that. That could have come right from a George Orwell novel.

Sure, its good business. Its such good business, that you have to ask why they need to do it in the first place? Do this mean raising the capitol gains tax is a bad business?
The Costco guy is making money now, so he does not lose it under Obama. Getting theirs NOW, because his candidate is making the future less profitable. But that doesn't matter to him, because he'll get his money now, screw the future. "Spread it around"? That's for suckers. Obama's policies are fine for him, but its better business to avoid them right now.

If there were better prices at Sam's should the Costco guy shop there? Just good business. Fits with his style.
There is a difference between what the business should do and what Sinegal does with his taxes...

I am sure you would be happy if Costco sent out a statement to shareholders telling them that due to an execs beliefs that we, the stockholders, should pay more taxes and that Costco will not paying out an big and early cap gains distribution which would allow each and every shareholder to save on their taxes...

There would be an uproar...he would be forcing his higher taxation beliefs onto the shareholders...

Now, if and when the the money moves from the corp coffers and into his private account ,we can then see if he indeed does believe in paying higher taxes...then, and only then, should we pound his sorry *** for his statement about paying more in taxes...

[cleller]

http://www.soonerfans.com/forums/showthread.php?174230-Dems-Good-for-you-just-not-good-for-me

The issue is that a Democrat arguing the rich should be paying more is a hyprocrite in this case.

Ugh. My apologies for not seeing the earlier thread. I have a big backlog of WSJ's I've yet to read.

I think some of you get the point. Its that a guy so willing to support a tax raising President is now benefitting from a process undertaken solely to avoid these future taxes.
Its a great strategy, but it shouldn't be necessary. Borrow money now to pay yourself before Obama taxes away your proceeds.

[pphilfran]

Ugh. My apologies for not seeing the earlier thread. I have a big backlog of WSJ's I've yet to read.

I think some of you get the point. Its that a guy so willing to support a tax raising President is now benefitting from a process undertaken solely to avoid these future taxes.
Its a great strategy, but it shouldn't be necessary. Borrow money now to pay yourself before Obama taxes away your proceeds.

No...the BoD is borrowing money to help the many shareholders to avoid taxes....

[cleller]

No...the BoD is borrowing money to help the many shareholders to avoid taxes....

Why should they have to do that? Who borrows money to pay dividends in a good economic environment?

The problem is Obama is creating a bad economic environment, and they are trying to sidestep in. Sinegal is the big man here. He knows its hypocritical. They can suck it up and live on their balance sheet, or say aloud that Obama is out to steal your money, so we're gonna pull a fast one. And how many shareholders are going to make $14 million, like Sinegal?
In that scenario, the Obama supporter Sinegal should sell his shares, and stand with his man, so as not to reap this tax evading windfall. Remember when executives tried to avoid any hint of impropriety? (Its mostly historical, now) Show that you stand for something. Not that you're just another two faced "this is better for you little people" liberal.

[pphilfran]

The reason they are doing it is because of the possibility of a looming LTCG tax hike (something I appose)...the corp's job is to create more wealth for the shareholder and they are doing just that...this always happens when cap gains rates are increased (I posted link earlier)

If he is really a "this is better for you little people" then he should have said we could have saved you some taxes and put more money in our pocket but due to my belief that taxes should be higher we are not going to go that route and in doing so you will pay more taxes...

As I said in a prior post, once the money hits his private account then it is up to him to walk the talk and if he does not then he is open for criticism...

[soonercruiser]

The company is in business to make money for the shareholders and paying the cap gains in a low interest rate environment is what they should do for the shareholders...if the company did not do this they would not be doing their shareholders their due...

Nothing to see here...

Nothing to see here - except the HYPOCRISY of the left and Left Wing media who will ignore this.....compared to attacking Bain Capital!

[Bourbon St Sooner]

This is a special dividend not a cap gain. You realize cap gain when you sell the stock. The lower rate for dividends came about in the Bush tax cuts.

That being said, it may be a good idea if they are not radically changing their capital structure to pay out the dividend. If they are changing their capital structure it could introduce more credit risk and increase borrowing costs, which may not be in the best interest of the shareholders. It also gives them less flexibility in case of another downturn. I don't know because I haven't analyzed their balance sheet.

[BermudaSooner]

That being said, it may be a good idea if they are not radically changing their capital structure to pay out the dividend. If they are changing their capital structure it could introduce more credit risk and increase borrowing costs, which may not be in the best interest of the shareholders. It also gives them less flexibility in case of another downturn. I don't know because I haven't analyzed their balance sheet.

Well, since they are borrowing $3.5 billion to pay a $3.0 billion dividend, I'd say it is significantly changing their capital structure. The rating agencies sure think so as they are getting downgraded.

[BermudaSooner]

Ugh. My apologies for not seeing the earlier thread. I have a big backlog of WSJ's I've yet to read.
.

No worries, I was just annoyed your thread got more posts than mine!

[Bourbon St Sooner]

OK, I just looked at their balance sheet. They currently have $2.3 bln in LT Debt which will go to $5.8 bln so it is definitely a significant change in their cap structure. Their debt/equity ratio will go from 12% to around 45%, where the industry average is around 20%. They are definitely adding some risk.

[Soonerjeepman]

OK, I just looked at their balance sheet. They currently have $2.3 bln in LT Debt which will go to $5.8 bln so it is definitely a significant change in their cap structure. Their debt/equity ratio will go from 12% to around 45%, where the industry average is around 20%. They are definitely adding some risk.

but, but it's all okay...he supports obama and the dem's.

Silly dems, truth is for rabbits.

[BermudaSooner]

but, but it's all okay...he supports obama and the dem's.

Silly dems, truth is for rabbits.

Well if they have any trouble, I'm sure Obama can come to the rescue with another loan.

[Soonerjeepman]

lol...yup. I guess I really can't see how the dems really believe he is what he is, and that they are okay with that. The dems and obama have not ONCE done a bit of compromise, but these guys here (on the board) think that is ok even after spouting that compromise is needed themselves.

[pphilfran]

I don't know why I was talking cap gains....brain fart I guess....but my point still holds true for dividends...

List of companies moving up dividend payments into 2012

Wal Mart
Hott Topic
The Buckle
Dillards
Oracle
Leggett & Platt
Myers Industries

They expect at least 100 companies to move payments forward to avoid higher taxes...

http://transcripts.cnn.com/TRANSCRIPTS/1211/21/cnr.02.html

COSTELLO: Wal-Mart pushing up its quarterly dividend payment by six days and that could save its biggest shareholder, the Walton family, $180 million in federal taxes, all by making that payment in 2012 instead of 2013.

Alison Kosik is in New York.

So, Alison, this move is in case Washington doesn't reach a deal in the so-called fiscal cliff?

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Exactly. So, let me back up a bit and let me start with explaining what exactly a dividend is. So, if you own shares in the company, the dividend is this chunk of cash paid back to you. Typically, you get it every quarter.

Now, Wal-Mart, it was going to pay its next dividend January 2nd. Because we don't know what's going to happen with the fiscal cliff, the expectation is that taxes are going to shoot out, Wal-Mart is paying out this dividend early so shareholders are going to be able to record that payout this year when dividends top out at 15 percent compared to next year when the rate is expected to jump to almost 40 percent if there's no deal reached on the fiscal cliff.

So, depending on how many shares you own, that can make a huge difference. The company says the move is in the best interest of its shareholders. And true, it's also in the best interest of the Walton family, which founded the company and owned almost half of the company stock -- Carol.

COSTELLO: So, Wal-Mart isn't the only company moving up the date, right?

KOSIK: Right. There's a lot financial data on this from Firm Market (ph), that's estimating that more than 100 companies will be issuing these special dividends in the fourth quarter. In fact, it's more than triple that have done this in recent years. Some retailers, one called Hot Topic, the other, the Buckle, they've already said they're moving up their dividend payouts to this year.

Manufacturing Leggett & Platt and Myers Industries, they're also doing it.

Companies, you have to understand, are very nervous about what the tax picture is going to be looking like next year, you know, if taxes suddenly shoot up because of no deal, and just moving up the dividend payout makes a big difference.

So, let me go through quick numbers for you. If Wal-Mart, Carol, had issued its dividend on January 2nd and tax rates went up, the company would have had to pay $276 million to the government. Compare that to this year's rates. Its tax bill comes out to about $95 million for those dividends. So, it's a huge, huge difference.

[Bourbon St Sooner]

Well if they have any trouble, I'm sure Obama can come to the rescue with another loan.

They're on the too big to fail list now. Otherwise known as FOB (Friend Of Barack).

[Bourbon St Sooner]

Phil, moving up your regular quarterly dividend a few days is a whole different thing from taking on debt to pay out a special dividend.

[pphilfran]

Phil, moving up your regular quarterly dividend a few days is a whole different thing from taking on debt to pay out a special dividend.

it doesn't matter...the stockholders and the market think differently...they announced on the 28th

http://i264.photobucket.com/albums/ii187/pphilfran/cpst.jpg

[Bourbon St Sooner]

Well, we all know the stock market is very short term thinking. I would expect after the ex-dividend date that the stock will settle back to what it was before. After all, it makes sense that between the dividend announcement and the ex-dividend date that one would pay extra for the stock since that cash payment is guaranteed.

[pphilfran]

You are still barking up the wrong tree...you are doing your best to condemn the company for it's actions to justify your disdain for their liberal leadership...

They are doing what every company attempts to do...maximize shareholder value...ex div is the 6th and even if the stock drops back to the earlier price it still benefited the shareholders due to lower tax consequences...even if the stock drops to 7 bucks below the pre dividend announcement it will make shareholders money due to lower taxes...

[Bourbon St Sooner]

You're getting me confused with other posters. I haven't condemned the company for anything. I'm not a Costco shareholder so I don't really care and I really don't GAS that the dude spoke at the Dem convention. I just think it's unusual to change your cap structure to pay a special dividend. Maybe they looked at their cap structure and decided they wanted a larger debt component, especially with interest rates where they are. I just simply stated that they are adding an element of risk to the stock.