U.S. Markets closed

McGraw-Hill to pay dividend in place of buyback

NEW YORK (AP) -- The McGraw-Hill Companies Inc. said Thursday that it will pay a special dividend of $2.50 per share on Dec. 27 and forego using $200 million to repurchase shares by the end of the year.

The special dividend will be paid to shareholders of record as of Dec. 18 and it comes on top of the regular quarterly dividend to be paid on Dec. 12 to shareholders of record as of Nov. 28.

At the end of September, McGraw-Hill had 284.6 million shares outstanding.

The company also said that its planned sale of McGraw-Hill Education business to funds affiliated with Apollo Global Management for $2.5 billion would close in early 2013 and the proceeds would be used to fund share buybacks, make acquisitions and pay off short-term borrowings.

McGraw-Hill 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 if the government goes over the so-called "fiscal cliff."

Many companies are reviewing their dividend policies now that it appears investors could soon pay higher taxes. 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.

McGraw-Hill shares rose 44 cents to $54.71 in after-hours trading following the dividend announcement. The stock closed up 76 cents at $54.27 in the regular session.