If regular dividends are the bread and butter of income investors, then special dividends are the icing on the cake, making the investment that much sweeter. These "one-time" payouts are used for several reasons ... and occasionally, they are paid out more than just one time.
Companies sometimes pay special dividends to share windfall profits, either from exceptional earnings or a gain on an asset sale, with investors. However, other stocks will use special dividends consistently as a way of supplementing a modest regular dividend with income based on their operational results. These distributions can swell in boom times and recede during tighter years.
Special dividends frequently fly under investors' radar because financial databases don't track them well. They're not included in calculating dividend yield, because they're not regular programs. But these payouts are cash all the same and can add significantly to shareholder wealth - in some cases they increase the annual yield several times over.
Here are 14 stocks with special dividends to watch. Not all of them are buys at the moment. But given past precedent and current financial standing, the potential for more special dividends is in the cards, making them all stocks to put on your radar. In many cases, these stocks pay regular distributions as well.
Market value: $7.6 billion
Regular annual dividend: N/A
Last special dividend: 50 cents paid in April 2019
Amerco (UHAL, $387.90) is the parent company of U-Haul International, America's largest do-it-yourself moving van and self-storage facility operator. The company's fleet consists of roughly 161,000 rental trucks, 118,000 trailers and 42,000 towing devices.
Amerco began building its self-storage business a few years ago as a natural outgrowth of the self-moving business. It has expanded its self-storage network to 1,519 locations across North America encompassing 55.2 million square feet of storage space. Amerco acquired 126 new storage locations in 2018 and has already purchased or developed 45 new locations so far this year.
The company rents out these trucks, trailers and storage units through a network of 1,790 corporate locations and 20,000 independent U-Haul dealers.
In the past five years, truck rental revenues have grown 7% per year and self-storage revenues have expanded 16.2% annually. During the first nine months of its fiscal year that ended March 31 (the full year will be reported in late May), Amerco's revenues grew 7% and adjusted net earnings popped by 25%.
Amerco doesn't pay a regular cash dividend, but it pays special dividends left and right. It delivered a 50-cent-per-share special distribution in April, preceded by four 50-cent payouts in 2018, $2.50 spread across three payments in 2017 and varying payouts in previous years.
Market value: $23.4 billion
Regular annual dividend: $1.28
Last special dividend: $2.00 in January 2019
Paccar (PCAR, $67.74) is a global leader in heavy trucks. The company is the world's eighth-largest manufacturer of 16-ton-and-larger trucks, which it manufactures under the well-known Peterbilt, Kenworth and DAF brands. Paccar also produces diesel engines and powertrains, and it provides financing and leasing services to its fleet customers.
Over the past decade, Paccar has sold more than 1.3 million trucks. While truck demand is cyclical, the company's financial performance across business cycles has been impressive. Since 1999, Paccar has improved revenues by 6% per year, grown net income at an 9% annual rate and boosted operating cash flow by 8% annually. Paccar has posted 80 consecutive years of net profits, paid dividends every year since 1941 and boasts an A+/A1 credit rating.
The company expects future growth to come from product line extensions, the launch of new hybrid and electric vehicles, and introducing innovations such as zero-emission vehicles, autonomous driving and smart truck technologies.
Paccar has paid year-end special dividends 19 times over the past 20 years in amounts typically ranging from 60 cents to $1.40 per share. However, last December, the company paired a whopping special dividend of $2.00 per share along with a 14% increase to its regular payout. The quarterly dole of 32 cents per share is good for a yield of 1.9%; a similar special dividend to 2018's, at current prices, would bump that yield up to 4.9%.
Piper Jaffrey analyst Alex Potter reiterated his "Overweight" rating (equivalent of "Buy") on shares in February, calling it a "bargain" and citing its high revenue visibility and record backlog. In early May, Baird analyst David Leiker reiterated his "Outperform" rating while raising his price target from $80 to $82.
Market value: $65.3 billion
Regular annual dividend: $3.00
Last special dividend: $1.75 paid in January 2019
CME Group (CME, $182.30) was formed in 2007 when the Chicago Mercantile Exchange merged with the Chicago Board of Trade. It provides futures and options contracts for commodity traders and the stock market.
CME has a solid track record showing consistent growth and benefits from its position as a market leader with exceptional pricing power. The group anticipates future growth will be tied to new trading products such as micro e-mini futures contracts on stock indexes that are one-tenth the size of existing contracts. In addition, CME is expanding globally via its recent acquisition of U.K.-based NEX.
Elevated volatility and increased customer demand led to record trading volume for CME Group in 2018, with volume exceeding 20 million contracts a day, revenues up 18% and adjusted earnings per share (EPS) soaring by 43%. Stocks have mostly been in recovery mode in 2019, tamping down volatility, but the recently re-widened trade rift with China might make investors nervous one more.
CME Group has been paying special dividends since 2012 and has grown the special dividend amount from 60 cents per share initially to $1.75 in 2018. The company bases special dividends on the amount of excess cash available each year, so the amount will vary depending on its capital needs and operating results.
Wall Street is only slightly optimistic about CME stock, which has four "Buys," two "Holds" and two "Sells" over the past three months. Notably, three analysts who say the stock is a "Buy" nonetheless lowered their price targets following the company's most recent earnings report, which included a 17% year-over-year drop in profits.
Costco Wholesale Corporation
Market value: $106.4 billion
Regular annual dividend: $2.60
Last special dividend: $7.00 paid in 2017
Costco (COST, $241.92) is the world's second-largest retailer behind Walmart (WMT). The company operates a global chain of membership warehouses offering a wide selection of merchandise at discounted prices. Costco's private-label Kirkland Signature-branded products compete with national brands across a variety of categories. At present, the company operates 772 warehouses worldwide, including 535 locations in the U.S., 100 in Canada, 39 in Mexico and the rest in Asia and Europe. Roughly 96.3 million members shop at Costco warehouses.
Fears that Amazon.com (AMZN) would rapidly dominate the grocery business and sink Costco's sales have so far proven unfounded. The company's sales grew 10% year-over-year in 2018 to boost profits per share by 17%. Strong results have continued in 2019, with Costco's sales rising 7% in its fiscal Q2, prompting a 26% improvement in profits.
The company has a 14-year dividend track record and has grown its regular payout by an average of 15% annually over the past half-decade. Costco also has paid three special dividends in recent years -- 2017, 2015 and 2012 -- leading some to speculate a special dividend will be paid this year or next. When asked about the likelihood for a 2019 special dividend, CEO Richard Galanti didn't deny the possibility but said no decision has been made yet.
Oppenheimer analyst Rupesh Parikh is among the experts who predicts a special dividend from the stock this year. He lists Costco as one of his top picks and has a $245 price target on COST, citing improving margins and the ability to leverage expenses as growth catalysts. He predicts a $10-per-share special payout in 2019.
National Presto Industries
Market value: $710.1 million
Regular annual dividend: $1.00
Last special dividend: $5.00 paid March 2018
National Presto (NPK, $101.16) is an industrial company that operates in two very disparate segments: Housewares/Small Appliances and Defense. The housewares/appliance business produces and sells pressure cookers, canners, deep fryers and similar products under the Presto brand name. Its Defense business manufactures 40mm ammunition sold to the U.S. Department of Defense under long-term contracts, as well as fuses and cartridge cases.
Defense is a much larger business for National Presto, accounting for 70% of the company's revenues.
Under a $43 million contract awarded last year, National Presto began producing small-diameter bombs launched from aircraft. The company was also awarded a $46.8 million year-two option in 2018 under a five-year Army contract, with deliveries scheduled to commence in 2020. Earlier this year, National Presto was awarded a year-three option valued at $23.8 million with deliveries expected to begin in 2021.
Due to the lumpy nature of its defense business, National Presto's sales and earnings tend to be erratic. However, the company typically generates sufficient EPS to cover its regular dividend several times over, leaving plenty of cash available for special dividends.
National Presto's sales fell 3% in 2018 because of store closings by customers that reduced houseware sales, as well as the sale of its less-lethal munitions business. Profits per share dropped 25%, primarily because of a $3 million impairment charge on the business sale. Another factor was a tough comparison to 2017, when the company realized a sizable gain on another asset sale.
National Presto's regular dividend, $1 per share paid annually, has remained flat for years and translates into a yield of about 1%. The company paid a $5 special dividend in 2018, however, that would translate into a 6% total yield at current prices. NPK has paid special dividends totaling $20.65 over the past half-decade.
Market value: $11.7 billion
Regular annual dividend: 42 cents
Last special dividend: 9.33 cents paid in December 2018
Rollins (ROL, $35.70) provides termite and pest control services worldwide under its well-known Orkin and Rollins brand names, coordinated via 700 branch offices. Much of Orkin's recent growth has come from franchising in smaller markets; at year-end 2018, the company had 47 domestic Orkin franchises and 86 international franchises.
Rollins also launched its Critter Control franchise program last year, which traps raccoons, skunks and other pests for home owners. The company currently supports 80 Critter Control franchises.
A $100 investment in Rollins six years ago would have been worth nearly $290 at year-end 2018, or rough twice the value of a similar investment in the Standard & Poor's 500-stock index. Reflecting the recession-resistant nature of the pest control business, Rollins has delivered 21 consecutive years of rising sales and profits. The company's sales improved 9% in 2018 and EPS grew 29%.
Rollins expects to expand internationally; the company currently operates in 57 countries. In addition, Rollins is filling in its U.S. footprint by acquiring smaller competitors such as Clark Pest Control, which added 26 locations to Rollins' footprint across California and Nevada.
The company rewarded investors with a 12.5% hike in the regular dividend last December, which was the 17th consecutive year that Rollins rewarded shareholders with a payout bump of 12% or more. Earlier, Rollins had announced a 3-for-2 split and a 14-cent-per-share special dividend (9.33 cents per share accounting for the split), which was paid to investors in December.
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Market value: $2.5 billion
Regular annual dividend: N/A
Last special dividend: $2.90 paid in January 2019
National Beverage (FIZZ, $54.55) owns the LaCroix brand of sparkling waters, which are marketed primarily to millennials and Generation Z consumers as a flavorful and healthier alternative to sugary sodas. It also markets Faygo, Shasta, Rip It energy drinks and Mr. Pure and Everfresh juices. All told, it's the fifth-largest soft-drink producer in the U.S.
The company's shares came under severe pressure in October 2018 because of a lawsuit alleging that its products are mislabeled as "all natural" and contain synthetic, potentially harmful compounds. A report in Popular Science disputed this claim, arguing that the ingredients in question are naturally occurring and derived from plants. Still, the pain as continued as weak earnings reported in March triggered multiple analyst downgrades. FIZZ has shed roughly 60% of its value from the stock's September 2018 peak and currently sits around three-year lows.
National Beverage didn't help its cause by blaming a 40% drop in third-quarter 2019 EPS on "injustice."
FIZZ paid two special dividends in 2017, as well as at various points in its past including 2012, 2011 and 2007. However, its $2.90-per-share special payout this year wasn't warmly received by all. Maxim analyst Anthony Vendetti, who already had a "Sell" rating on the company, wrote that the special dividend enriched the CEO and was an inappropriate way to allocate capital.
Market value: $500.6 million
Regular annual dividend: 48 cents
Last special dividend: 10 cents in October 2018
Marine Products (MPX, $14.67) manufactures fiberglass powerboats under the Chaparral and Robalo brands. Chaparral is a line of sterndrive, outboard and jet boats, while the Robalo line consists of outboard sport fishing boats. The company's craft range in price from $23,000 to $318,000 and are sold through a network of 168 domestic and 86 international independent dealers as of year-end 2018.
Marine Products' recent growth has been the result of product line extensions, including the introduction of lower-priced entry-level models that appeal to value-conscious consumers.
The company has delivered consistent sales and EPS growth over the past five years as well as strong gains in operating margins. Last year was plenty productive for Marine Products, which grew its sales by 12% year-over-year and squeezed that into a 38% improvement in profits.
Marine Products has paid special dividends four times in five years, including a 10-cent dividend delivered last October. Typically, each special distribution amounts to an extra quarterly payment.
Income investors received another a treat in January, when MPX increased the regular dividend by 20% to 12 cents per share; the 3.3% yield on its regular payout is robust among companies that often pay special dividends.
John B. Sanfilippo & Son
Market value: $877.5 million
Regular annual dividend: 55 cents
Last special dividend: $2.00 paid in August 2018
John B. Sanfilippo & Son (JBSS, $77.05) is a processor and distributor of nuts and dried fruit products under its Fisher, Orchard Valley Harvest, Squirrel, Southern Style Nuts and Sunshine Country brands, as well as a few private brands. Its Fisher line is the leading brand in the packaged nut category.
Growth in the company's sales and EPS has been erratic in the past due to fluctuating prices for commodity nuts and increased competition for market share from private-label nut products - an ideal situation for a special-dividend model.
Sanfilippo's sales increased 5% in 2018, but EPS declined 11% because of higher commodity costs for some nuts that couldn't be pass through to customers because of holiday promotional pricing commitments. During the first half of fiscal 2019, the company's sales slipped 4% and EPS dropped 3% due to shifts in sales volume from higher-priced cashews to lower-priced peanuts.
JBSS declared a special dividend of $2.00 per share last August, and it has delivered special payouts every year since 2012. The company also began a regular annual dividend in 2017 and increased it by 10% last August to 55 cents per share. That translates to a sub-1% yield on current prices.
Market value: $883.4 million
Regular annual dividend: $1.00
Last special dividend: $1.00 paid in December 2018
The Buckle (BKE, $17.94) is a retailer of casual apparel and footwear for young adults. Its brand names include BKE, Buckle Black, BKE Boutique, Red by BKE, Daytrip denim, Gimmicks, Gilded Intent, Outpost Makers, Departwest, and Veece. The company operates 450 stores in 42 states.
Like many mall-based retailers, Buckle has experienced sales erosion and declining average sales per store over the past five years, which is why shares are worth well less than half of what they were worth in 2014. Earnings have drifted lower, too, though regular dividends are well-covered by earnings.
Buckle's sales fell 3% in 2018 due to one less week in the fiscal year, lower comparable-store sales, the closing of 12 stores and reduced retail prices on merchandise. EPS did improve 6%, but largely because of a lower tax provision.
Buckle has a long history of paying special dividends. It distributed $1.00 per share in 2018, $1.75 in 2017, 75 cents in 2016 and $1.00 in 2015, in addition to its 25-cent regular payout, delivered quarterly. That payout has remained flat since 2016, however.
Zacks Equity Research has a "Buy" rating on the stock due to recent upward revisions in analyst earnings estimates. However, Deutsche Bank analyst Tiffany Kanaga downgraded the stock to "Sell" in March, citing comparable-store sales weaknesses that are pressuring margins and deepening challenges in the women's apparel business, where falling prices have not translated into store traffic gains. Analysts as a whole see revenues declining roughly 2% this year, then recovering by 2% in 2020.
Market value: $366.6 million
Regular annual dividend: 12 cents
Last special dividend: $1.00 paid in October 2017
Insteel Industries (IIIN, $19.04) is the nation's largest manufacturer of steel reinforcing wire products used in concrete construction. It wares are sold to manufacturers of concrete products and used in non-residential construction. Insteel owns 10 manufacturing plants across the U.S. that are located in close proximity to its customers. Demand for its products is both seasonal and cyclical, driven by the level of construction activity.
While relatively unknown, this company had been a decent performer over the past decade, roughly matching the S&P 500 from the beginning of 2009 through mid-2018. Since then, the market has notched slight gains of 5%, while IIIN has plunged 40% over tariff concerns - concerns that continue today.
The cyclicality of the business also mean that Insteel's sales and profits are erratic, though earnings typically cover the dividend numerous times over. And its operations were strong in 2018, with sales growing 16.5% and profits up 46% backing out tax-law impacts. However, its results in the first two quarters of 2019 have included weaker products on weather-related shipment delays, higher manufacturing costs and an increase in low-price competition from imports.
Growth in the regular dividend has been tepid at just 2% annually over the past four years, but Insteel has been generous in rewarding investors with special dividends. The company paid special dividends of $1.00 in 2015, $1.25 in 2016 and $1.00 in 2017. That said, Insteel did not declare a special dividend for 2018. For now, it's an aberration, but one that investors should watch considering the significant boost to annual yield provided by its previous special payouts.
Natural Health Trends
Market value: $123.8 million
Regular annual dividend: $64 cents
Last special dividend: 8 cents paid in January 2019
Natural Health Trends (NHTC, $10.86) is a micro-cap company that sells personal care and wellness products under its NHT Global brand name in more than 40 countries, including the U.S. and Canada, as well as many parts of Europe and Asia. Approximately 90% of the company's order volume comes from Hong Kong.
According to the company's annual filings, "We distribute our products internationally primarily through a network marketing system, which is a form of person-to-person direct selling. Under this system, members primarily refer our products to prospective consumers or they may buy at wholesale prices for personal consumption or for resale to consumers."
The company has been dogged by allegations that it's a pyramid scheme; indeed, shares have lost 60% over the past year thanks in large part to a China Central Television broadcast alleging NHTC was "operating illegally." Natural Health Trends rejected these claims, arguing that its business in China complies with all applicable regulations.
National Health Trends' 2018 results also were dogged by global trade tensions, currency effects and China's slowing economy. Sales declined 3% year-over-year, and while EPS improved by 31%, that was primarily because of a lower tax provision. Natural Health Trends also temporarily suspended member activities in China while working with government agencies to ensure full regulatory compliance.
While NHTC stock itself is on shaky ground, the dividend is well-covered by EPS and has grown nearly five-fold in five years. Moreover, the company paid a special dividend in 2016, multiple special distributions in 2017 and 2018, and one special dividend already this year.
Market value: $1.4 billion
Regular annual dividend: N/A
Last special dividend: $3.00 paid in August 2018
Shutterstock (SSTK, $39.10) manages a huge library of high-quality digital content, including photographs, illustrations and videos, available for download. Users pay a fee to license, download and incorporate these images into their own work. More than 1.9 million customers licensed content from Shutterstock during 2018.
The company's paid downloads have rapidly risen, from 125.9 million in 2014 to 179.6 million last year. Each download generated $3.40 in revenues. The Shutterstock's downloadable library has also grown steadily to 241.7 million images and 13.1 million video clips in 2019.
However, while Shutterstock has generated consistent revenue growth over five years, EPS growth has varied due to investments in building out infrastructure. The ratio was on SSTK's side in 2018, however, as revenues grew 12% as a result of increased download activity, and resulted in a 35% jump in adjusted EPS. In 2019, the company is guiding for 10% to 12% revenue growth.
Shutterstock paid a special dividend of $104.9 million, or $3 per share, in August 2018, and it also repurchased roughly 2.6 million shares. The volatility of Shutterstock's profits, and the fact that SSTK decided to repay investors this way rather than initiate a regular dividend, seem to increase the likelihood that the company would use special dividends under similar circumstances in the future.
Royal Bank of Scotland
Market value: $35.8 billion
Regular annual dividend: 14 cents
Last special dividend: 10 cents in February 2019
Royal Bank of Scotland (RBS, $5.92) is a leading U.K. retail and commercial bank. Its principal brands are NatWest in England and Wales, Royal Bank of Scotland in Scotland, and Ulster Bank in Ireland. The bank was hit hard by the 2008 financial crisis and posted several consecutive years of losses before returning to profitability in 2017.
The bank's EPS more than doubled in 2018 as a result of expense reductions and an increase in average interest-earning assets.
Royal Bank plans to invest nearly $2 billion in strategic growth initiatives in 2019 while trimming $385 million from operating expenses. Cost will decline as the bank accelerates its transition to digital services. Approximately 6.4 million customers are already using its mobile app, up 17% from last year, and the bank recently launched a service for commercial customers enabling online applications for loans up to £750,000 - the largest value available digitally from any U.K. commercial bank.
Last year, RBS paid its first dividend in a decade. The bank paid a combination of interim and special dividends that was 60% higher than analyst forecasts. However, the bank also cautioned investors that Brexit concerns could be a drag on near-term earnings. Going forward, the bank plans to pay ordinary dividends at 40% of earnings, and additional special dividends have not been ruled out - but again, this is a new program from an only recently profitable bank, so investors should temper their expectations.
Also important to remember: This lender is 70% owned by the U.K. government, which acquired its stake as part of a taxpayer bailout during the financial crisis. The government plans to sell its multibillion-dollar stake by 2024. Another overhang on RBS comes from recent lawsuits alleging that Royal Bank of Scotland was one of several international banks involved in price-fixing in the European government bond market.
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Copyright 2019 The Kiplinger Washington Editors