Costco (NASDAQ:COST) announced on Wednesday that it will pay a special dividend of $7 a share in December. That comes on top of its regular quarterly dividend.
Investors reacted immediately, sending Costco shares up about 5% in Wednesday morning trading.
The warehouse retail club chain joins a number of other companies like Dillard’s (NYSE:DDS) and Las Vegas Sands (NYSE:LVS) that are declaring special dividends before year-end, while other companies, including Wal-Mart (NYSE:WMT), are paying regular quarterly dividends early. These moves are meant to avoid potentially higher taxes on dividend income in the coming year, the Associated Press noted.
Tax cuts enacted during the Bush administration slashed taxes on dividends to 15%, but those rates will expire in January unless Congress acts. Without a compromise, dividends will be taxed at the same rate as wages next year, depending on the income brackets, meaning people with high incomes could pay up to 43.3% on dividends in 2013.
Costco will pay the special dividend on Dec. 18. Its normal quarterly dividend of 27.5 cents a share will be paid on Nov. 30.