4 Special Dividend Situations Worth Putting on Your Radar

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For some investors, dividends act as a small bonus one receives every quarter for being a loyal shareholder, while others use a company’s distributions as a strategy and investment in and of itself; discover one market-beating strategy here.

When a company has extra cash on its balance sheet or wishes to distribute its income in a one-time event to shareholders (often for tax reasons), they will announce special dividends, typically out-sized to and independent of regular quarterly distributions.

Let’s take a look at a few stocks that made similar announcements in May and expect to go ex-dividend in the coming weeks.

CVR Energy

CVR Energy (NYSE: CVI)
announced on May 28 its intentions — which have now passed — to pay a special dividend amounting to $6.50/share on June 10, for those shareholders on record as of June 3.

The $5.5 billion (bn) independent fuel refiner and marketer has had a blow-out year so far, up 28%, even after clocking in a gain of over 100% in 2012. CVR Energy continually beats earnings expectations, including a 25% upside surprise at the start of May. Billionaire Carl Icahn of Icahn Capital LP expects a payment of $462 million (mm) for his ownership in CVR; see his top picks here.

In this case, the time between the announcement of the dividend and the ex-dividend date was very short (most likely to honor existing shareholders). However, there is a consolation prize for those who can’t get into CVR Energy in time for the dividend.

Due to Icahn’s very large stake in CVR Energy (north of 71 mm shares, amounting to almost $3.7 bn worth), Icahn Enterprises plans to raise its own annual distribution from $4/share to $5/share, payable in cash or depository units. That policy is slated to take effect in the third quarter (Q3) of this year.

United States Cellular

United States Cellular (NYSE: USM)
joined CVR in announcing a significant special dividend in May; United States Cellular intends to have a one-time payout of $5.75 per share for shareholders on record as of June 11 (payout will be two weeks later).

Like the majority of the stocks on our screen, United States Cellular falls into the definition of a small-cap, which has a market capitalization between $1 bn and $5 bn. We take a keen interest in this size range, as we have found a small-cap strategy that has beat the market by 18 percentage points a year on average.

The $3.3bn wireless telecom service provider surprised analyst and investors alike by reporting a positive EPS of $0.16 on May 3rd compared to an estimated -$0.14. Billionaire Mario Gabelli of GAMCO Investors keeps 3.7 mm shares in his portfolio; read about his other positions here.

Main Street Capital

Main Street Capital (NYSE: MAIN)
declared a special dividend in the middle of May as well, amounting to $0.20/share for those investors on record as of July 18th. Although not as large as the distributions on our list, the dividend nicely compliments Main Street’s existing dividend yield of 6.2%.

The investment firm typically pays out a special dividend once per year, but this semi-annual one marks a new, continuing tradition of twice-a-year payouts. Main Street recently saw its credit line increased with one lender relationship, opening up easier financing for future debt and equity investments. Billionaire Israel Englander of Millennium Management owns slightly less than 50,000 shares; view his top picks here.

Neutral Tandem

Neutral Tandem (NASDAQ: IQNT) not only joins our list as a company releasing a special dividend, but it announced its first-ever quarterly dividend in late May as well. On top of the $0.0625/share quarterly dividend the company plans to pay out (which adds up to a 4.4% forward yield), Neutral Tandem also has intentions to pay $1.25/share to investors on record as of June 14.

Shareholders should take note, however, as the network solutions provider has a market cap of $190 mm and is priced just south of $6; it is also coming off of a rough year, down 56% in the last twelve months. Famed tech investor and billionaire Jim Simons of Renaissance Technologies has 800,000 shares in his portfolio, down from 1.1 mm at the end of 2012.

Final thoughts

The four aforementioned stocks—Neutral Tandem, Main Street Capital, United States Cellular and CVR Energy—each offer, or have offered investors a unique special dividend situation. For those who missed out on CVR Energy’s relatively short intermediate period before issuing its own payout, Icahn Enterprises is worth looking at as a type of secondary investment off of this move.

This article is written by Eric Winter and edited by Jake Mann. Insider Monkey's Editor-in-Chief is Meena Krishnamsetty. They don't own shares in any of the stocks mentioned in this article. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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