Speculation regarding the “fiscal cliff” continues to dominate the stock market, with numerous corporate events occurring to avoid the looming automatic tax hikes and spending cuts.
The latest trend has more than 100 corporations moving up their 2013 dividends in advance so that investors won’t be taxed as heavily. Standard and Poor’s records a big jump in companies issuing next year’s dividends before the year-end expiration of the 2003 legislation. S&P expects many more payouts before the end of 2012.
Dividend payments are currently taxed at 15 percent, but the rate could go as high as 43.4 percent for some top earners if the Bush-era tax cuts expire. That change does not include the surcharge scheduled to take effect in January to pay for the Affordable Care Act.
The Dow Jones industrial averages are more than 6.5 percent above the June low of 12,101, and anything below that would indicate a bearish attitude. To be bullish, the Dow must exceed the 13,610 mark. When this report was written, the Dow industrials hit 13,077.04.
Following are updates on two Town Crier “50” stocks.
• Oracle Corp. (ORCL; $32.07) CEO Larry Ellison will benefit from special dividends paid in the fourth quarter. Based on his share as owner of 23 percent of company stock, Ellison’s payout will total approximately $198.9 million. Oracle announced last week that it planned to pay out more than $800 million for next year’s dividend during December.
Oracle has a market cap of $155.7 billion, with a price/earnings ratio of 16.1. Its shares are up 26 percent this year, and more analysts rate it as a Buy than a Hold. No analysts suggest selling Oracle stock.
• Apple Inc. (AAPL; $527.91) stock suffered its largest drop in more than four years last Tuesday. When one considers that the stock was higher than $705 several months ago, that loss may be an indication that a bear market is on the horizon.
Apple’s problems are many, but one reason for the decline could be that the company is not paying a special dividend before capital-gains taxes rise Jan. 1 – and Apple is sitting on a heap of cash.
Another reason may be that Google’s Android smartphones are gaining ground, especially in China, where the iPhone is struggling.
On the positive side, last week Deutsche Telekom announced that it planned to add Apple products to its portfolio in the coming year. This means another outlet for the iPhone that will also include a cellular version of the iPad.
Apple CEO Tim Cook said the company would relocate production of one of its existing lines of Mac computers to the United States next year. He noted that the company would spend $100 million in 2013 to move production of the line out of China because its wages are rising quickly.
More than 20 analysts recommend Apple as a Buy for both the short and long term.