Companies Shelling Out Billions to Beat the 'Fiscal Cliff'
By: Patti Domm | CNBC Executive News Editor
But the question is whether this mad dash by dozens of companies is ultimately good or bad for their performance. Siegel said it really does not matter, and CNBC's informal study of stock moves this quarter shows the same.
So far this quarter, about 70 companies in the Russell 3000 have announced special dividends, compared to approximately 44 Russell special dividend declarations in all of 2011. Standard & Poor's says all told, 173 public companies announced special dividends in November, a one-month record.
About half of those Russell 3000 companies that announced payouts saw their stocks, as of Tuesday, rise at least 1 percent or more from the day they announced the special dividend. However, a third of those companies' stocks are down more than 1 percent, and the rest are flattish.
A common thread among companies that are paying out dividends, like Wynn's, for instance, is a big holding by insiders, families or private equity.
"If there's big insider holdings, obviously they would communicate to the firm's management that they would be prefer a dividend early because it would be taxed more later on," said Siegel. "The management should be concerned about shareholders anyway."
Larry McDonald, chief policy strategist at Newedge, said there are some stocks that fit the profile for possible special dividend payouts, including Ebay, Dell, Oracle, Microsoft, Yahoo and Charles Schwab.
Speculation about a special dividend could keep a floor under those stocks in the event of a broader market decline.
Besides big insider ownership and lots of cash, McDonald says to look to more mature businesses.
"If you've got a business that's really growing, and you start doing this then not just the board, but shareholders could take action, so it has to be a mature profile. In a declining profile, you could even get some more motivation there," he said.
Investors hunting for quick trades in these stocks should be careful.
"Trading these at this point is very risky because I've been hearing about this and hedge funds were doing this type of work in September, even August," McDonald said. "The market is down since September and August, and people are definitely bidding some of these names up and I would say a lot is priced in," he said.
(Read More: Who Gets Hurt the Most If US Goes Off 'Fiscal Cliff'?)
McDonald said the stocks may get an immediate pop, once they announce a dividend.
That happened in the shares of Las Vegas Sands, up more than 5 percent Tuesday after announcing late Monday it would pay $2.75 per share, or $2.3 billion in special dividends to shareholders of record Dec. 10. Chairman Sheldon Adelson said the priority is returning capital to shareholders, and he is the biggest shareholder, with a 52 percent stake.
Other companies that announced special dividends this week include Brown Forman, Ethan Allen, Drew Industries, CNH and Insperity.
The other trade investors are making ahead of a pending dividend tax hike is the sale of dividend paying stocks. But McDonald said that trade may reverse, as the Fed's next meeting approaches, and it is likely the Fed will beef up its quantitative easing program by extending asset purchases to include the Treasurys it was buying in Operation Twist. Operation Twist expires at the end of the year, and the Fed had been selling shorter duration securities as it bought longer dated Treasurys.
"You could get a situation where QE comes in, and people rush back to dividends again," McDonald said.
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