Utilities such as Southern Co, cash-rich companies like Microsoft Corp and retailers from Wal-Mart Stores Inc to Brookstone Inc may benefit the most from US President George W. Bush's plan for US$670 billion in tax cuts.
The proposal would repeal the tax shareholders pay on dividends, making utilities and other companies that already offer large payouts more attractive to investors. Companies that have enough money to pay fat dividends, such as Microsoft and Oracle Corp, may also gain, analysts said.
PHOTO: AP
Bush's plan is intended to put more cash in Americans' pockets and encourage investors to buy stocks after three consecutive declining years, the worst streak since 1941. Bush also wants to accelerate cuts in individual tax rates scheduled over 10 years and to increase deductions for people with children.
PHOTO: AP
"History has shown that these types of initiatives have put money in people's hands and they have gone out and spent it," said Michael Anthony, chief executive of Brookstone, a retailer of electronic gadgets and tools. Bush's proposal "appears to be the most aggressive thing we could have hoped for."
Bush made his third tax-cut proposal in two years at a speech in Chicago on Tuesday, saying it would give the economy an "immediate boost" and create 2.1 million jobs. The administration estimated the plan would save 92 million American taxpayers an average of US$1,083 this year.
The US Congress must pass the proposal and Bush's Republican party has a small majority, meaning changes are likely and it may be months before any additional tax cuts begin to affect corporations, investors said.
The Standard & Poor's 500 Index fell 6.08 points, or 0.7 percent, to 922.93 on Tuesday after rising 5.6 percent in the first three days of the year, the best start since at least 1941. Administration officials disclosed portions of the plan earlier this week.
"There will be some horse-trading, and maybe we'll get legislation by midyear," said Philip Orlando, who helps oversee US$6 billion as chief investment officer at Value Line Asset Management. "Then corporate boards will sit down and make some plans."
Oracle shares rose US$0.73 to US$12.69 on Tuesday after chief financial officer Jeff Henley told investors at a conference in Scottsdale, Arizona, that the company might pay its first dividend if Bush's proposal is adopted. Oracle has US$5.48 billion in cash and securities.
Microsoft, the world's biggest software maker, rose US$1.03 to US$55.80. The company, which has US$40.5 billion in cash, declined to say whether it would consider paying dividends.
Other companies with big dividend yields, the amount they pay compared with their stock price, also gained. Philip Morris Cos, the world's largest cigarette maker, rose US$1.62 to US$41.13, and smaller rival R.J. Reynolds Tobacco Holdings Inc advanced US$1.42 to US$42.67.
Philip Morris has an indicated dividend yield of 6.2 percent and R.J. Reynolds 8.9 percent.
The S&P 500 Utilities Index had its biggest gain in 11 weeks Monday as investors bought shares of Southern and Public Service Enterprise Group, companies that pay the largest dividends.
"The companies that pay a dividend will get a boost in their stock price," said Thomas Capps, chief executive of Dominion Resources Inc, owner of Virginia's largest utility. "Some companies could cut their dividend to reinvest the capital. The shareholders will still get the same payout. The key is that it will give them the money for more capital spending."
Carmakers and retailers also anticipate a boost amid evidence that growth in consumer spending is slowing. US retailers had their smallest holiday sales gain in three decades, according to analysts at Bank of Tokyo-Mitsubishi Ltd.
General Motors Corp chief financial officer John Devine said the Bush incentives could help the US auto industry sell more than the 16.2 million cars and light trucks the company had forecast for this year, softening a drop from 16.8 million last year.
RETHINK? The defense ministry and Navy Command Headquarters could take over the indigenous submarine project and change its production timeline, a source said Admiral Huang Shu-kuang’s (黃曙光) resignation as head of the Indigenous Submarine Program and as a member of the National Security Council could affect the production of submarines, a source said yesterday. Huang in a statement last night said he had decided to resign due to national security concerns while expressing the hope that it would put a stop to political wrangling that only undermines the advancement of the nation’s defense capabilities. Taiwan People’s Party Legislator Vivian Huang (黃珊珊) yesterday said that the admiral, her older brother, felt it was time for him to step down and that he had completed what he
Taiwan has experienced its most significant improvement in the QS World University Rankings by Subject, data provided on Sunday by international higher education analyst Quacquarelli Symonds (QS) showed. Compared with last year’s edition of the rankings, which measure academic excellence and influence, Taiwanese universities made great improvements in the H Index metric, which evaluates research productivity and its impact, with a notable 30 percent increase overall, QS said. Taiwanese universities also made notable progress in the Citations per Paper metric, which measures the impact of research, achieving a 13 percent increase. Taiwanese universities gained 10 percent in Academic Reputation, but declined 18 percent
UNDER DISCUSSION: The combatant command would integrate fast attack boat and anti-ship missile groups to defend waters closest to the coastline, a source said The military could establish a new combatant command as early as 2026, which would be tasked with defending Taiwan’s territorial waters 24 nautical miles (44.4km) from the nation’s coastline, a source familiar with the matter said yesterday. The new command, which would fall under the Naval Command Headquarters, would be led by a vice admiral and integrate existing fast attack boat and anti-ship missile groups, along with the Naval Maritime Surveillance and Reconnaissance Command, said the source, who asked to remain anonymous. It could be launched by 2026, but details are being discussed and no final timetable has been announced, the source
CHINA REACTS: The patrol and reconnaissance plane ‘transited the Taiwan Strait in international airspace,’ the 7th Fleet said, while Taipei said it saw nothing unusual The US 7th Fleet yesterday said that a US Navy P-8A Poseidon flew through the Taiwan Strait, a day after US and Chinese defense heads held their first talks since November 2022 in an effort to reduce regional tensions. The patrol and reconnaissance plane “transited the Taiwan Strait in international airspace,” the 7th Fleet said in a news release. “By operating within the Taiwan Strait in accordance with international law, the United States upholds the navigational rights and freedoms of all nations.” In a separate statement, the Ministry of National Defense said that it monitored nearby waters and airspace as the aircraft