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Cognex says it will pay $1 special dividend

NATICK, Mass. (AP) -- Cognex Corp., which makes products like barcode readers and machine vision sensors, said Tuesday it will pay a special dividend of $1 in December and doesn't plan to pay dividends for the next eight quarters.

Cognex will pay out about $43 million to shareholders through the special dividend, which is payable Dec. 24 to shareholders of record on Dec. 14.

Federal tax rates on dividend income are scheduled to rise in 2013, and Cognex said that increase would make dividends an ineffective way of returning cash to shareholders. Many companies have declared special dividends in late 2012 or have moved their quarterly dividend payments to late 2012 from early 2013 to protect investors from the potential tax increase.

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 at the same rate as ordinary income like wages. That means 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.

Chairman Robert Shillman said in a statement that if tax on dividends increase substantially, "cash dividends will no longer be an effective way of rewarding our shareholders."

Cognex declared its latest quarterly dividend Oct. 29. On that date, Cognex said it would pay a dividend of 11 cents on Dec. 14.