Special dividends typically are one-time windfalls for investors. But a few companies regularly weave these payouts into their broader dividend strategy.
Regular dividends are the bread 'n' butter of income
investing. But special dividends are the icing on the case.
Special dividends are one-time payouts that companies use in
various situations. Some firms declare special distributions to share financial
windfalls with investors after an asset sale or other unusual event. Such was
the case during 2020 for Macquarie Infrastructure (MIC) and NortonLifeLock
(NLOK). They're nice surprises for existing shareholders, but because the
events triggering these payouts aren't likely to repeat, they're not a reason
for new money to buy.
But some companies use special dividends much more
frequently, using them as part of a conservative payout strategy that allows
them to better reward shareholders during boom years without having to reduce
regular payouts in leaner times.
Stocks that follow this pattern attract income investors with
the potent one-two punch created by a regular (and often rising) dividend
supplemented by frequent special dividends. And importantly, these kinds of
dividend stocks typically fly under many investors' radar. That's because
financial databases don't consider the contribution from special dividends when
calculating dividend yield; a company with a 1% yield might actually deliver 3%
or 4% in annual income when accounting for these frequent one-time payouts.
Here are nine great dividend stocks that have a tendency of
paying special dividends. They're a rare breed indeed, and they're worthy of a
bit more attention than they typically get. Each has paid multiple special
dividends in recent years, and most have a history of frequently increasing
their regular payouts, too.
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