The Joplin Globe, Joplin, MO

Local News

December 11, 2012

Local companies fear recession from ‘fiscal cliff’; tax hike on dividends could affect utilities

CARTHAGE, Mo. — Leggett & Platt Inc. prides itself on the dividends it has consistently paid its investors over the years.

In November, the company announced a fourth-quarter dividend of 29 cents per share, or $1.16 per year, giving it an annual yield at that time of 4.3 percent — which was about double the average of other companies in the S&P 500.

“Leggett & Platt possesses the highest dividend yield among all the S&P 500’s Dividend Aristocrats,” the company said in a statement, “with more than 30 consecutive annual dividend increases.” Dividend Aristocrats are those S&P companies that have followed a policy of increasing dividends every year for at least 20 consecutive years.

“Leggett & Platt has increased its annual dividend for 41 consecutive years, at a 13 percent compound average growth rate,” the company said. “Only 11 members of the S&P 500 have a longer string of consecutive annual dividend increases.”

But in November, the Carthage-based company took an unusual step with regard to dividends, announcing that it would pay its fourth-quarter dividend on Dec. 27 rather than in January, as it normally does.

It said it was moving up the dividend payment “given the significant pending increase of the federal tax rate on dividend income in 2013.”

In other words, it wanted to spare investors — at least for one quarter — the possible higher tax rate if Congress and President Barack Obama are unable to avoid going over the “fiscal cliff.”

The fiscal cliff refers to tax increases and spending cuts that are set to take effect on Jan. 1 unless Congress and the president reach some agreement before then. Among those automatic tax increases is a steep rise in the tax rate for dividend income for many investors.

Dividends are payments companies make to investors, usually every quarter, although they are not required to do so. Investors can take it in the form of a payment or roll it back into stock.

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