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.