Patronage dividend coming in October

WSM’s Board of Directors declared the co-op’s fifth patronage dividend for consumer and worker owners. Though the return is modest, 7,917 consumer owners who spent at least $492.60 during the past fiscal year will receive a dividend with a percentage-off shopping coupon around October 15th.

Your dividend distribution will appear as a store credit on your owner share. You can redeem it at any store. You also have the option of donating all or part of your dividend distribution to the Cooperative Community Fund.

Another 7,804 owners who made purchases during the fiscal year but did not qualify for a dividend distribution will receive an email with a percentage-off shopping coupon.

Patronage Dividend FAQs

About Patronage Dividends:

•   What are patronage dividends?
Patronage dividends are used by most co-ops to distribute profit to co-op owners. Patronage dividends are in keeping with the third Cooperative Principle, which states that owners benefit in proportion to how much they use the service of the cooperative.

•   What are the goals of the patronage dividend?
The Board established five goals for patronage dividends:

  1.  Ensure that WSM has adequate capital to meet current and future needs.
  2. Keep profits in the local community.
  3. Return any profits beyond the co-op’s current needs to our owners.
  4. Build savings for worker owners.
  5. Build the Cooperative Community Fund by offering the option to donate the cash portion of your dividend.

•   What are the advantages of patronage dividends?
There are three main advantages for the co-op:

  1. Patronage dividends are a fiscally responsible way to manage the co-op’s profits—patronage dividends are disbursed at the end of the year only after the co-op knows it made a profit.
  2. Patronage dividends enable the co-op to prioritize saving for the future by funding capital improvements out of co-op profits instead of relying on outside debt.
  3.  Patronage dividends allow a portion of profits to be reinvested in the co-op tax-free. This is a significant tax advantage because the co-op doesn’t pay tax on profit allocated to patronage dividends.

•   What is patronage and how is it measured?
For consumer owners, patronage is measured by the amount of purchases made during the year. For worker owners, patronage is measured by the number of hours worked during the year. These are standard measures for consumer and worker co-ops.

•   Are patronage dividends new for WSM?
Fiscal year 2015 is the fifth consecutive year that WSM is distributing a patronage dividend to both consumer owners and worker owners.

About This Year’s Patronage Dividends:

•   How much profit did WSM make this year?
WSM made $694,000 profit for the year ending in June 2015, or approximately 2.0% of sales.

•   How much is this year’s dividend?
The Board decided to distribute 20% of profits from owner patronage back to owners, and to retain and reinvest 80%.

Dividend_retainedBOX•   Why is 80% of the dividend being retained and reinvested?
Retained dividends help WSM save for the future and build equity. The Board decided to retain 80% of both the consumer and worker dividend for future needs and to build co-op equity.

•   How is profit split between consumer and worker owners?
Profits are split evenly between consumer and worker owner. WSM distributes a percentage of profits to worker owners based on how many hours a worker owner works in a year and to consumer owners based on how much a consumer owner spends in a year.

•   What happens with dividends that are not redeemed?
Dividends that are not redeemed by January 31, 2016 are donated to the Cooperative Community Fund.

About the Consumer Owner Distribution:

•   How and when will the dividend distribution take place?
Dividend announcements will be mailed to owners around October 15.  Your dividend distribution will appear as a store credit on your owner share on October 15. You can apply your dividend toward your next purchase or you can donate all or part of the amount to the Cooperative Community Fund.

•   What is the largest and smallest dividend?
The largest dividend disbursement will be $40.94, and the smallest dividend voucher will be $1. Owner households need to have spent a minimum of $492.60 for the fiscal year to receive the minimum dividend.

•   What is the return on my investment as a consumer owner?
The average dividend of $5.32 is based on spending $53 per week at the co-op. This represents about a 5.3% return on an average share investment of $100.

•   What happens to the retained portion of my dividend?
The retained 80% will be reinvested for the long-term financial sustainability of the co-op. This reinvested portion is your contribution to building the financial future of your co-op.

About the Worker Owner Distribution:

•   What are worker owners?
Worker owners are employees of the co-op who have elected to purchase a $500 ownership share.Like consumer owners, worker owners vote for worker owner representatives on the Board of Directors and are eligible to run for a seat on the Board. Worker owners receive their patronage dividend based on hours worked.

•   How and when will the worker owner dividend distribution take place?
Checks are distributed to worker owners in late September.

•   What happens to the retained portion of my worker owner dividend?
The retained 80% will be reinvested in the co-op through your internal account.Subject to vesting, this reinvested portion is available to you when you retire.

•   What is vesting for worker owners?
It takes 5 years of employment for worker owners to become 100% vested. During those first five years, employees receive 20% of their dividend disbursement for every year they have worked. When the employee retires or leaves the co-op, the vested amount of their retained patronage dividend is paid to the employee.

•   Will my individual dividend go down if there are more owners in the future?
Having more owners will not make the dividend to existing owners go down. As more workers become owners, their dividends will come from what is now non-patronage income.

About Income Taxes on Dividends:

•   Do I have to pay income taxes on my consumer owner dividend?
As a consumer owner, you are generally not required to pay personal income taxes on your dividend. The IRS considers a consumer owner dividend a rebate on purchases, which is not taxable. If you purchased goods for other than personal use, you should consult your tax advisor about this issue.

•   Do I have to pay income taxes on my worker owner dividend?
As a worker owner, you are required to pay personal income taxes on the entire dividend amount including the retained portion. The IRS considers a worker owner dividend as income which is taxable.

About the Cooperative Community Fund:

•   What is the Cooperative Community Fund?
The Co-op Community Fund (CCF) makes annual grants to local groups working on issues related to sustainable agriculture, hunger, environmental protection, and cooperatives. The CCF is a vital tool in supporting hardworking local groups that help us build a strong vibrant community. See the annual report for this year’s recipients, here.

•   What is the endowment of the CCF and what are the plans for increasing that?
The Cooperative Community Fund currently has an endowment of $135,000. Our goal is to increase this endowment to expand the number and size of the grants that can be given. In most co-ops the main way the CCF grows is through the donations of patronage dividends. Although each donation in itself is modest, the cumulative impact is great.