Where I’m Finding One-Time Special Dividends Paying Up to 42%
January 20, 2020
Investors Can Sign Up for a 42% Special Dividend by January 23
On January 10, shares of NortonLifeLock Inc (NASDAQ:NLOK) soared on the declaration of a dividend. But it wasn’t just any dividend payment.
The board announced a special dividend following the sale of the company’s enterprise security business. The distribution, which will be paid on January 31 to investors of record as of January 23, will amount to $12.00 per share. (Source: “NortonLifeLock Declares $12 Special Dividend,” Business Wire, January 9, 2020.)
Based on the cybersecurity company’s stock price as of this writing, the special dividend equals a total yield of 42%.
This isn’t the only windfall that NortonLifeLock shareholders have received. The special dividend announcement comes on top of the regular $0.125-per-share quarterly distribution to investors. NortonLifeLock executives have also vowed to buy back $1.6 billion in shares through the company’s repurchase program.
Investors love these types of special dividend announcements, and it’s no mystery why. In one payment, shareholders can collect high yields like 12%, 27%, or 39%. It would take years to earn this much money through ordinary dividends, especially in a world where most stocks pay just one or two percent annually.
For this reason, I routinely highlight these deals in my premium advisory Passive Monthly Income. In recent years, this strategy has emerged as a lucrative source of income.
Take TransDigm Group Incorporated (NYSE:TDG), for instance. Last August, the airplane parts maker paid a special dividend of $30.00 per share. (Source: “Transdigm Group Reports Fiscal 2019 Third Quarter Results and Declares a Special Cash Dividend of $30.00 Per Share,” TransDigm Group Incorporated, August 6, 2019.)
Based on the company’s stock price before the announcement, this payout equated to a distribution yield of seven percent. That triggered a buying frenzy on Wall Street. After the press release hit the wires, the TransDigm share price jumped more than 10%.
We saw a similar situation play out at Warrior Met Coal Inc (NYSE:HCC). The miner had an unusual problem in 2017: too much cash. To clear its balance sheet, management announced a one-time special dividend of $11.21 per share. (Source: “Warrior Met Coal Clarifies Ex-Dividend Date for Special Dividend,” Warrior Met Coal Inc, November 6, 2017.)
Warrior Met executives ran into the same problem again following President Donald Trump’s tax cuts. In 2018, Warrior Met Coal made a second one-time payment of $6.53 per share. (Source: “Warrior Met Coal Announces Second Quarter 2018 Results,” Warrior Met Coal Inc, August 1, 2018.)
Management followed this up with a $4.41-per-share special dividend the following year. (Source: “Warrior Met Coal Announces Special Cash Dividend,” Warrior Met Coal Inc, April 23, 2019.)
The thing is, spotting these opportunities in advance isn’t actually that hard. Before cutting these types of deals with shareholders, most companies share a couple of traits:
- They have shareholder-friendly management teams with a long track record of rewarding their investors.
- They have too much cash on hand, either through a recent asset sale or large, surplus profits.
Sadly, most of these payments go unnoticed. Web sites like Yahoo! Finance don’t incorporate these special distributions in their yield calculations. As a result, many investors dismiss these stocks out of hand.
But by digging into their corporate filings, investors can often earn far higher yields than with other stocks.
Now here’s the best part: right now, we’re in special dividend season. Companies like to make their distribution announcements near the start of the year. So over the next few weeks, we could see dozens more special payout announcements.
Out of fairness to my paid subscribers, I won’t reveal those companies here. But if you are willing to do some digging, you can find dozens of outsized income opportunities. Keep your eyes peeled!
