LAKEWOOD, Colo. (AP) -- Einstein Noah Restaurant Group Inc.'s shares gained in midday trading Friday after the restaurant operator said it has completed a review of its strategic alternatives and would pay a special dividend of $4 before the end of the year.
THE SPARK: The Lakewood, Colo., based company, which operates the Einstein Bros. Bagels, Noah's New York Bagels and Manhattan Bagel chains, said Thursday that its board has completed its review of strategic alternatives to maximize shareholder value by recapitalizing the company. The company said it will amend some of its loans for more favorable terms and increase the revolving line of credit available on one term loan.
The added access to cash will be used to pay for a special dividend of $4 per share as well as for other general corporate purposes. The special dividend is payable Dec. 27 to shareholders of record as of Dec. 17. This is in addition to its previously disclosed regularly quarterly dividend of 12.5 cents per share.
Einstein Noah will pay approximately $68 million total for both dividends.
THE BIG PICTURE: This is one of a growing list of 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.
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.
SHARE ACTION: Shares were up 3 cents to $15.82 by early afternoon but rose as high as $16.90 earlier in the day on the news. The company's stock is trading at the higher end of its 52-week trading range of $13.34 to $18.58.