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Who’ll Pay Special Dividends? Pros Place Bets

Bruno J. Navarro
Tuesday, 27 Nov 2012 | 1:49 PM ET

With the prospect of higher tax rates on dividends ahead, a few companies appear likely to dole out payments before year end, the CNBC "Fast Money" pros said Tuesday.

The lack of a budget deal in Washington could mean higher taxes on dividends next year, leading investors to look at stocks paying a special dividend by Dec. 31.

OptionMonster.com's Jon Najarian expressed optimism that politicians would avoid the worst of the potential pitfalls.

"I believe they will be fixed, but nonetheless, if you're somebody who will be impacted by hundreds of millions of dollars, you push that special dividend out there," he said. "Dillard's and LVS are two of those big names."

For potential special-dividend plays, he added, "I'd look at Microsoft and Apple, quite frankly."

Najarian noted that late Apple CEO Steve Jobs's widow, along with several board members, held large amounts of stock.

Microsoft insiders Steve Ballmer, its CEO, and founder Bill Gates could also potentially choose to avoid a big tax bill.

"They can take the money off the table at 15 percent," he said. "Why wouldn't you?"

Joe Terranova of Virtus Investment Partners liked Murphy Oil for its potential $2.50 per share special dividend, as well as its debt offerings.

Who's Paying Special Dividends? Pros Place Bets
With the prospect of tax increases on dividends looming, a few companies appear likely to dole out payments before year end, pros say.

"They're raising the capital," he said. "They're getting ready for not only the special dividend but a billion-dollar share buyback. I say you own it on the capital allocation strategy."

Stephen Weiss of Short Hills Capital added that casinos such as Las Vegas Sands and Wynn are cash-rich and could be a sign for the industry doling out special dividends.

"You'll see more in this space in particular," he said.

JJ Kinahan of TD Ameritrade said that it wouldn't surprise him to see more special dividends overall.

Spirits company Brown-Forman was just one.

"Many think it's just because they make Jack Daniels and Southern Comfort, and we may need some as we head to the 'fiscal cliff,' but honestly I think you'll see companies in this situation — they're near a 52-week high, they have a lot a lot of cash on hand — declaring these special dividends," he said.

Another likely name: Nike.

Kinahan noted that insiders held nearly 20 percent of the company's shares.

"It has a lot of cash on hand, especially compared to its debt. It doesn't have a lot of debt relative to its cash," he said. "These are the types of stocks that you should be looking for to be paying these special dividends going into the end of the year."

Trader disclosure: On Nov. 27, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Terranova is long VRTS, VZ, XOM, DELL, GLW, SWN, AAPL, TJX; Weiss is long BAC; Najarian has long call spreads on AAPL, JPM, WMT, FB, DE, DDS; Najarian is long GLUU, CME, CBOE; Najarian owns short puts on GLD, SLV, AGQ; Kinahan is long BAC, C, WFC, CSCO, YHOO, SBUX, FB, MSFT.

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MUR
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LVS
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DDS
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MSFT
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AAPL
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AMTD
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BFB
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NKE
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