Dish Paying Shareholders To Beat Tax Hike

Dish Network is the latest media company to announce a special dividend payment to shareholders before tax rates are likely to go up next month. Sinclair Broadcast Group recently announced a similar special dividend payout.

The Board of Directors of Dish declared a one-time dividend payment of $1.00 per share. It will be paid December 28 to shareholders of record on December 14. Dish does not pay a regular quarterly dividend.

Individual tax rates on dividend income are set to go up January1 if Congress does not act to preserve the tax cuts from the Bush Administration. If an agreement is reached this month to avert going over the so-called “fiscal cliff” many observers expect it to include some sort of tax increase for wealthier investors. That’s why Sinclair and Dish are among the companies making special payouts now to shareholders before the higher taxes take effect.

Analyst Marci Ryvicker at Wells Fargo Securities calculates that Dish will be paying out around $450 million to shareholders with the special dividend.

The move was not unexpected. In fact, since President Barack Obama was reelected it was considered likely that Dish would make a cash distribution before the anticipated tax rate increases in January. Ryvicker had been expecting two bucks a share and some others, she said, had speculated as high as $5.00.

“As a result, today’s $1/share may seem disappointing – but we think the explanation lies in the fact that the final AWS-4 [Advanced Wireless Services-4] NPRM has not been approved or released by the FCC. This NPRM clearly has implications for what [Dish Chairman] Mr. Ergen can and cannot do with Dish’s spectrum assets, and therefore this uncertainty likely weighed on Mr. Ergen’s decision when it came to the special dividend. Our view — had the NPRM been approved, the dividend would have been higher,” Ryvicker said in a note to clients.