Sturm, Ruger Aims 9 Percent Special Dividend At Shareholders

By Dan Haar On November 20, 2012 · 4 Comments

Call it the fiscal cliff payoff: Sturm, Ruger & Co. Inc., which already pays a substantial dividend, said it’s handing out $4.50 a share in a special dividend Dec. 21.
The Fairfield-based sporting firearms maker didn’t mention the tax hikes on dividends and capital gains that will come at the start of 2013 if Congress and Obama don’t reach a deal to avert the fiscal cliff. No need to say it.
Even without a deal, an increase in taxes on investment income is as likely as not, so companies that are already sitting on cash have a reason to dole it out now.
Shares of Sturm Ruger, like the other publicly traded gunmaker, Smith & Wesson Holding Corp. of Springfield, are up since the election in a market that has been down, as enthusiasts stock up ahead of feared tightening of gun laws.
Other companies have announced special dividends and some retailers that typically pay in January, including Walmart, are moving up regular dividends to December.
Many companies are cash-rich these days, raising the obvious question of why some people link corporate tax cuts to job creation. What companies need in order to hire is more demand and a stable economy with a consistent tax policy, not more cash.
For Sturm, Ruger, the payout makes sense with or without an impending tax hike. The company had $75 million in cash on hand in September, with zero debt and solid cash flow. The cash dividend of about $86 million will be paid to shareholders of record as of December 7. Shares closed Tuesday at $51.52, up from $48.83.
“We can continue to fund our high rate of organic growth, including expected increases in both working capital and capital expenditures, and fund our quarterly dividend while still growing our cash reserves at a modest rate,” Chief Executive Officer Michael O. Fifer said in a written statement.
Sales were so strong in the spring that Sturm, Ruger stopped taking new orders for two months.
“This special dividend reflects our confidence in the future to be able to pursue good opportunities that come our way. We remain committed to our new product development strategy and will continue to seek accretive acquisition opportunities and prudently expand our manufacturing capacity,” Fifer continued.

4 Responses to Sturm, Ruger Aims 9 Percent Special Dividend At Shareholders

old capitalist says:

November 20, 2012 at 11:36 am

This is a company in an industry who’s surge in demand can be credited to the policies of the current political party in power. Another is the sign industry – you know the ones making “For Sale” “For Lease” “Foreclosed” signs. So lets give them credit for these two bright spots in our economy.
Bill Shortell says:

November 21, 2012 at 11:02 am

Always appreciate the balance in Dan’s writing. The key paragraph is where you come out and baldly state that “demand,” i.e. employment levels, is the problem with the economy.

I may have to disagree with the other point in the paragraph, however. Does “consistent tax policies,” mean keeping the bite on the highest brackets at historically low levels? Or do you mean consistent in a long-range, historical sense? Huge tax breaks in recent decades for the rich have been a significant factor in the runaway federal deficit and low consumer demand.

Let’s return to tax equity and then stabilize them.
- old capitalist says:
  
  November 21, 2012 at 1:07 pm
  
  I disagree Bill, the small net reduction in tax rates (down at the federal level, up on the state and local levels) and the resultant effect on government revenue has been far surpassed by the level and rate of increase in spending. A huge share of government spending is non-productive and inefficent and drains capital from the more productive private sector which inhibits growth, and in our current world economy, sends investment overseas.
  Also, a 1/4 of a million dollar income for couples with children and small businesses, especially in this state, does not make one rich.
  
  Let me take this opportunity to wish Dan and all my fellow Haar report bloggers a very Happy Thanksgiving. Blessings to all.
Dan Haar says:

November 21, 2012 at 2:42 pm

Thank you very much, Old Capitalist. Having seen some very inefficient companies, I’m not sure government is worse, but that of course is not the standard to aspire to.

Happy Thanksgiving!