Spokane-area public companies' special dividends hit at year-end
Moves could lessen shareholders' tax burdensDecember 20th, 2012
In light of uncertainty over what will happen to federal tax rates in 2013, at least a couple of the Inland Northwest's large publicly-traded companies have issued special dividends as this year comes to a close.
These companies are following a national trend in which publicly traded corporations are issuing a record number of special dividends.
Howard Silverblatt, an S&P Dow Jones indices senior index analyst, reported on Dec. 13 that extra dividends this month were running 136 percent above the year-earlier period. Earlier in the month, he projected that 2012 would be a record year for special dividends.
In the Inland Northwest, Sterling Bank parent Sterling Financial Corp. earlier this month authorized a special cash dividend of 35 cents per common share and accelerated the payment of its regular 15 cent quarterly dividend. The combined 50 cent dividend is to be paid Dec. 28 to shareholders of record as of Dec. 21.
Ezra Eckhart, chief operating officer of Sterling Financial and president of Sterling Savings Bank, says, "This has been a clear topic that we've been analyzing for a long time. The tax implications are known today and not known on Jan. 1."
Ambassadors Group Inc., the Spokane-based student-travel program provider, issued a 50 cents-per-common-share special dividend last month, following that with a standard 6 cents-per-share dividend, which was paid Dec. 6 to shareholders of record as of Nov. 22. The company has issued a 6 cent dividend each quarter for the past two years.
Tony Dombrowik, chief financial officer at Ambassadors Group, says tax implications to shareholders were discussed but weren't necessarily the deciding factor in the company's decision to issue a special dividend.
"Was it considered? Yes," Dombrowik says. "Was it the driver? No."
Glacier Bank Inc., the Kalispell, Mont.-based parent of Coeur d'Alene-based Mountain West Bank, announced in late November that it would be moving its dividend payment up to December, paying it today, Dec. 20, for shareholders of record as of Dec. 11. That dividend typically would be in January, the company said.
At 14 cents a common share, Glacier Bank's dividend was just 1 cent a share more than the previous one. The company said it has paid a dividend for 111 consecutive quarters.
Ambassadors Group's Dombrowik says a special dividend doesn't benefit a publicly traded company itself directly.
"We talked about the deployable cash on hand," he says. "We felt it was time to deploy it back to the shareholders."
Banks, Eckhardt says, do benefit somewhat in that a dividend improves performance ratios.
"If you redistribute that equity to shareholders, then it allows the bank to increase its performance relative to return on equity," he says.
More banks have been offering dividendssome more aggressively than Sterling, he saysbecause many of them have capital ratios that far exceed those required by the Federal Deposit Insurance Corp. and feel they need to return that capital to shareholders.
The impetus for the special dividends is anticipated tax increases in 2013, after what commonly are referred to as the Bush-era tax cuts expire at the end of this year, if President Obama and Congress don't take action.
In other words, income reported in 2012 is expected to be taxed at a lower rate than 2013 income.
Projected tax increases are one component of the fiscal cliff, which also involves a decrease in government spending that's scheduled to occur in 2013. Obama and Congress currently are negotiating a plan to avoid the fiscal cliff, but if they fail to reach an agreement, the Congressional Budget Office is projecting an increase in unemployment and another recession as a result.
A few other Inland Northwest publicly traded companies that have issued dividends to shareholders late this year say those dividends are part of the normal course of business.
Spokane-based utility Avista Corp., for example, paid a dividend of 29 cents per common share on Dec. 14 to shareholders of record as of Nov. 29.
Avista spokeswoman Jessie Wuerst says the company has issued a dividend of 29 cents a share each quarter of this year, after having raised it once each of the last three years and twice in 2008.
"Utilities are traditionally a value stock," Wuerst says, "but the board also needs to make sure that the dividend payment is sustainable."
Potlatch Corp., of Spokane, plans to issue a dividend of 31 cents per common share on Dec. 28 to stockholders of record on Dec. 17, which spokesman Mark Benson says is consistent with its dividend disbursements.
Hecla Mining Co., of Coeur d'Alene, is issuing a dividend on Jan. 2, 2013, for some of its preferred stock holders on record on Dec. 14.