Companies are racing the clock to hand out billions in special dividends before year end—and some of them are taking on debt to do it.
The latest is Costco [COST 101.88 -0.70 (-0.68%) ] , which announced a $7-a-share payout to stockholders Wednesday and is issuing bonds to pay for the $3 billion dividend. (Read More: Costco to Pay Special Dividend)
Fearing a tripling of dividend tax rates next year, companies have found one-time payouts and early payments of quarterly dividends as a way to beat some of the impact of the "Fiscal Cliff."
Taking advantage of super-low interest rates, companies have been issuing debt at a record rate this month. Some say they plan to use the proceeds to fund dividends and share repurchases.
“I think what you’re seeing is a reaction to the lack of clarity around the tax laws, and that’s what Treasurers and CFOs are doing,” said Joel Levington, managing director of corporate credit at Brookfield Investment Management.