Leggett & Platt, a diversified manufacturing company, will pay its fourth quarter dividend earlier than usual. Will other companies follow suit?
How is one company positioning for higher taxes in 2013? Leggett & Platt will pay its fourth-quarter dividend on December 27, 2012, earlier than usual, the firm’s board of directors announced today.
A diversified manufacturing company based in Carthage, Mo., Leggett & Platt typically pays out its fourth-quarter dividends in January. The “significant pending increase of the federal tax rate on dividend income in 2013” prompted the company to accelerate the payment, according to a Leggett & Platt statement. The company plans to pay out a dividend of 29 cents a share to shareholders on record on December 10, 2012.
The company is one of 51 firms tracked in the S&P 500 Dividend Artistocrats index, which has returned 12.86 percent since the beginning of the year. Dividend Aristocrats have increased their dividend each year for the last 25 consecutive years or more, according to S&P Indices. Leggett & Platt boasts 41 years of annual dividend increases, and claims the highest dividend yield among Dividend Aristocrats with more than 30 consecutive years of increases.
Taxes on income from investment dividends are currently capped at 15 percent, but that special tax status could disappear if Congress allows Bush-era tax cuts to expire at the end of the year. In that scenario, dividends would be taxed as regular income. For earners in the highest tax bracket, who also face a Medicare surcharge, the tax rate on dividend income could exceed 40 percent.
Higher taxes on dividend income may motivate top earners to sell some of their dividend-producing investments, or to concentrate these products in tax-sheltered accounts. Millionaire Corner research shows that the vast majority of affluent investors receive dividend, and a significant share look to dividends to provide income in retirement.
Millionaires also rank investing in dividend stocks as a preferred strategy for coping with market volatility. More than 40 percent of Millionaire investors participating in our monthly survey for June indicated they would invest more in dividend stocks in an environment of extreme market volatility. Companies that pay dividends tend to be larger, more stable companies providing income that can help offset market uncertainty. Reinvested dividends allow investors to build shares without taking money from other investments.