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Beating the 'Dividend Cliff': CEOs, Founders Cash In

Sheldon Adelson
Jerome Favre | Bloomberg | Getty Images
Sheldon Adelson

The race to beat the "dividend cliff" is on – and it's generating some big pay-days for CEOs and company founders.

Larry Ellison is the latest corporate chief to benefit from the spate of special dividends or accelerated dividends announced in the fourth quarter. Oracle announced Monday it would pay more than $800 million in next year's dividends this month.

Ellison's share of the payout is $198.9 million, based on his ownership of 23 percent of the company's stock.

The biggest dividend payday this quarter is for Sheldon Adelson, CEO of Las Vegas Sands. He'll receive about $1.2 billion from the company's dividend.

His tax savings on the distribution could be as much as $340 million – more than twice the amount that he reportedly spent to fund candidates in the 2012 election.

More than 110 companies have announced special dividends totaling more than $22 billion this quarter – more than three times last year's fourth-quarter total,according to Markit Equities Research. The payouts are aimed at beating a potential increase in tax rates for dividends.

Dividend payments are currently taxed at 15 percent, but the rate could go to 43.4 percent for some top earners if the Bush-era tax cuts expire.

The total taxes paid on that $22 billion of dividends will be around $3.3 billion – $9.5 billion less than next year's potential taxes.

All shareholders benefit from the dividends, of course. But some of the biggest beneficiaries are corporate insiders and large shareholders. The companies paying accelerated dividends have an average insider ownership of 27 percent — higher than the broadermarket, according to Markit.

Ellison's potential tax savings on his pay-day is $25 million — small change for a man worth $37 billion, but perhaps enough to buy another couple of homes on Carbon Beach. (Ellison recused himself from the board decision on the dividend).

Carnival CEO Micky Arison is getting $89 million Carnival's special dividend. His tax savings is a potential $25 million. In a corporate statement, Arison said:"This additional dividend is in keeping with our previously stated strategy of returning excess free cash flow to shareholders. Looking forward, we remain committed to increasing shareholder returns through a combination of dividend distributions and opportune share repurchases."

Tom Frist will receive will receive more than $350 million from HCA's special dividend, saving him a potential $100 million in taxes.

Other big beneficiaries of the dividend payouts this quarter include the Walton family, Leonard Blavatnik and the founding family of Dillard's.

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