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Shares of Western Digital Corp. rose Wednesday, after the computer hard drive maker declared a quarterly dividend of 25 cents.
THE SPARK: For the quarter ending Dec. 28, Western Digital said it pay its dividend on Dec. 26 to shareholders of record as of Dec. 14.
THE BIG PICTURE: The Irvine, Calif., company said in September that it hoped to return half of its free cash flow to shareholders in 2013 through a combination of dividends and stock buybacks.
Western Digital 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.
SHARE ACTION: Up $1.72, or 5.1 percent, to $35.31 in morning trading, after jumping as high as $35.47 shortly after the markets opened. Over the past 52 weeks, the company's shares have traded between $28.31 and $45.94.