PLEASANTON, Calif. (AP) -- Safeway Inc. is moving up the payment date for its quarterly dividend in an apparent effort to take advantage of currently low tax rates on dividend income for shareholders.
The grocery store chain said Thursday that its dividend of 17.5 cents per share will be payable Dec. 31 to shareholders of record as of the close of business Dec. 17. The company typically pays its fourth-quarter dividend in January.
Safeway is the latest company to move up its quarterly payout or issue a special end-of-year payment to protect investors from potentially having to pay higher taxes on dividend income starting in January.
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.
Safeway's shares jumped more than 4 percent to $18.24 by midmorning following the news. The Pleasanton, Calif.-based company operates 1,644 stores in the United States and Canada.