Whole Foods Market announced it will pay a special dividend of $2 a share,
joining other companies who are trying to get ahead of possible tax increases
starting next year.
The dividend "provides us with another opportunity to return capital to our shareholders," said co-CEO John Mackey in a statement.
"We believe we will continue to generate strong cash flows and are confident in our ability to maintain a healthy cash reserve, internally fund our accelerated growth plans, and continue our quarterly dividend and stock repurchase programs," he said.
The natural grocery store chain said that the special dividend will be paid on Dec. 21 to shareholders of record on Dec. 10.
With almost 186 million shares outstanding, the special dividend would cost Whole Foods about $372 million.
Its stock added 32 cents to $93.40 in premarket trading on Friday.
Whole Foods declared a regular quarterly dividend of 20 cents per share earlier this month. That dividend will be paid Jan. 29, 2013, to shareholders of record on Jan. 18, 2013.
Whole Foods is one of the latest companies to issue a special end-of-year payment to protect investors from potentially having to pay higher taxes on dividend income starting in January.
The White House and Republican congressional leaders are trying to strike a deal to avoid falling off the fiscal cliff, as the combination of simultaneous tax hikes and spending cuts has been dubbed.
Many companies are reviewing their dividend policies now that it appears investors could soon pay higher taxes. Since 2003 investors have paid a maximum 15 percent on dividend income. But that historically low rate will expire in January unless Congress and President Barack Obama reach a compromise on taxes and government spending.
As it stands, dividends will be taxed as ordinary income in 2013, the same as wages, so rates will go up depending on which income bracket a taxpayer is in. For the highest earners, the dividend rate would jump to 43.4 percent.
Additional information from the Associated Press.
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