MEDFORD, Ore. (AP) — Lithia Motors Inc. on Friday declared a fourth-quarter dividend of 10 cents and will pay it earlier than usual, protecting its shareholders from tax increases that could go into effect next year.
The Medford, Ore.-based automotive retailer will pay the dividend on Dec. 28 to shareholders of record as of Dec. 14. The dividend is in lieu of the dividend typically declared and paid each year in March.
Lithia 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.
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.
Its shares rose 33 cents to $35.69 in morning trading. Its shares are down 4 percent from a 52-week high of $37.15 on Oct. 18. They traded as low as $20.62 in early January.