You're watching...
Cognex CEO Robert Shillman on the company’s decision to pay out its dividend from the next 8 quarters now because of potential tax hikes.
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
How many of you out there have -- dividend paying stocks in the past year because.
They were simply the best way to get better yields and say for example the ten year treasuries.
Now more than 200 of those companies are playing beat the fiscal -- clock accelerating their fourth quarter dividend payouts.
Including -- next which is not only pushing up its quarterly dividend payout.
But it's also prepaying its dividend for the next eight quarters that means no dividend from 2013 to 2014 and then who knows what's gonna happen let's find out.
Fox Business exclusive from Newton Massachusetts -- CEO doctor -- Showman who has several million shares as well on this thank you -- for for joining us here to talk about this in a Fox Business exclusive.
What brought you to this decision and and did you they have emergency meetings I love to know the behind the scenes things that happen and I think investors due to.
Well lose a personal thank you for having me on the short and the actions that we took -- -- -- the board meeting we took two actions.
We accelerated.
The dividend for Q4 2012.
Which would normally have been paid sometime in march of 2013.
We accelerated that we're going to keep paying that.
Sometime in mid December.
And at the same time we decided that that was a good time and I'll tell you don't want.
Because of tax law changes that we media accelerator -- prepaid.
Eight sets of dividends -- -- would have been due for.
Cure for all of 2013.
And 2014.
So we prepaid Q4 of 2012 which is eleven cents.
We estimated that those other -- dividends that would be due in 2012.
Not 2013 2014.
Would be about a dollar.
So going to prepaid this year right in mid December to all of our shareholders of record of the eleven cents plus another dollar for every -- they'll.
And the motivation for that was very clear.
Or we've always believed in sharing our success with our shareholders we've been giving dividends since 20031.
Of the first the high tech companies -- -- to do with.
It is our -- explain though Bob what you guys do for people who don't know what you make bar code readers you have vision sensors are high technology company.
And in doing so you're pushing forward about 43 million dollars to shareholders too worried Bob.
That -- and there is a deal that's eventually struck before December 31.
And then you're stuck for two years without dividends -- would you then start paying more dividends tell me how you you will push us.
For I wouldn't see it as being stuck it's as if -- you know your birthday is on April and we decide to give you your birthday gift in December.
Is that being stuck with on the birthday gift.
Liz well that's not -- as I say I -- -- already what you gave me give me another one.
Our journalism -- after -- -- They would rather have cash now so even -- let us say that the young.
That the tax rate doesn't change nobody's gonna complain about getting their dividend a dollar and eleven cents.
Two years early.
And then otherwise so while there may be people who will forget -- year and a half from now where's my dividend check and we'll just tell them that we already -- regarding from 2012.
Yeah.
You yourself will not or we're not -- anyone OK we've we are rewarding our shareholders.
Four they -- -- loyalty and for the support of the company and we do we get in the tax efficient way.
Now turns out the taxes because of the bush tax cut the federal taxes -- when dividends are 15%.
Now people think that's -- now turns out.
Do you know that -- -- -- -- reader you're -- your viewers already know that the company already paid tax on that money yeah whatever money we have we pay tax on and that is already the shareholders' money.
Whether we Victoria 30% we pay the corporate tax on the money which belongs to shareholders they should get -- -- -- -- but okay.
The tax used to be 36%.
That used to be ordinary income President George Bush for eight years lowered to fifteen and we believe the tax in 2013.
And beyond will go to 40% or more.
So -- -- giving our Cheryl does not only.
This cash advantage in advance.
But -- but after the tax it's it's considerably larger instead of of paying a fifty instead of paying.
If 40% tax federally they will only pay a 15% tax and often don't -- Talk to the president and if you haven't.
If you had his ear what would you say about this issue.
I would say that he should know more about economics he should study what it's called the Laffer Curve.
Which shows that after a certain point the government raises less money by increasing the tax rate just thinking that this way.
If the tax rate were a 100% lose.
How much money with the government rates they'd raise a 100% of zero because nobody would go to work if the government confiscated everything.
So at some point.
The tax rate increases.
But the amount of money the government raises through taxes decreases.
And it turns out most analysis most.
-- economists agree that that -- is about 30%.
Up to 30%.
The government raises more money by have a tax of 30% -- let me -- 30% the government raises less money.
Let me just say -- very large shareholders not the largest 2.4 billion shares and so you're saving about what not 900.
Says yes 690000.
Dollars on your tax bill as well which gives people a sense of how much money could possibly be saved.
Final question really quickly as we have to go in 2015 will you start paying dividends again.
You know I can't decide it's not just up to me was aborted due a board of directors.
Will take a look at that time and see what the story has been our goal was to reward shareholders are other ways of doing that pretty -- you know -- -- out buying shares back.
Increasing got earnings per share by decreasing -- -- shares so we're always concerned when you always will take care.
Of our customers our employees our shareholders our neighbors.
And our vendors that's what we do and that's why we're successful.
Thank you for coming on the show up it's good to have you.
Thank you Robert showman is context chairman and CEO and I and I want to make a point about this too.
We love the products it speeds up our lives the -- code reader but -- fascinating window into why companies and boards are doing this the close.
