Tellabs tries to boost stock with special dividend
NAPERVILLE, Ill. (AP) — Tellabs Inc. is joining the list of companies paying a special dividend to reward shareholders before a potential tax hike kicks in next year.
The cash dividend of $1 per share announced Thursday will be paid Dec. 21 to stockholders of record on Dec. 14. That schedule means the dividend will fall under the 15 percent tax rate that has been applied to stock dividends since 2003. That could change beginning next year, unless Congress and President Barack Obama reach a compromise on taxes and government spending.
Without an agreement, dividends will be taxed as ordinary income in 2013. For high-income households, that could result in dividends being taxed at a rate as high as 43.4 percent. Even if a political compromise is reached on taxes for next year and beyond, dividend recipients could still be facing higher bills than they did under the 15 percent rate.
Tellabs is trying to boost its slumping stock price. Before the company disclosed the special dividend, Tellabs' shares had dropped by 27 percent so far this year.
Paying the special dividend will cost Tellabs about $368 million, based on the company's outstanding stock at the end of September.
Tellabs also plans to spend up to $225 million buying back its own shares under a program approved earlier this month.
The company, which is based in Naperville, Ill., has about $942 million in cash.
Investors seemed to appreciate Tellabs' gesture, driving up the company's stock price by 38 cents, or nearly 13 percent, to $3.33 in Thursday's extended trading.