Special Dividends Offer Spots for Investing

Kyle is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

“Don’t go chasing waterfalls…” – TLC

The year-end spate of special dividends has lonely, little investors like me scratching their heads at the impulse reaction of several CEOs and their seeming need to follow the lemmings, allocating capital like a band-aid on a severed limb. But in our society, whcih has become more and more accustomed to entitlements and everyone receiving a participation medal, it makes perfect sense.

Much like the overwhelming rash of articles speculating on which stocks to own if our government goes cliff diving, you can’t complete a day’s worth of stock study without stumbling upon the news that yet another company has announced a stocking stuffer for “investors” by way of a “special” one-time payout. But is it really that special, especially when so many are doing it?

When Las Vegas Sands (NYSE: LVS) announced a $2.75 per share special dividend to “loyal” shareholders on record as of Dec. 10, the share price moved up accordingly (4% pre-market Nov. 27 after closing the previous day a few cents above $44). As the ex-dividend date hit, the stock offered a decent entry opportunity for long-term investors, closing the day at $43.56 per share (it’s currently up a couple bucks since that date). Earlier in November, the company announced a 40% boost to their quarterly dividend, to 35 cents per share beginning in the first quarter of 2013. At current share prices the dividend yield is at 3%, paying $1.40 per share annually.

Rival Wynn Resorts (NASDAQ: WYNN) announced after market close Oct. 24 a special dividend of $7.50 per share (at the time, a jackpot 6.7% yield), and the ensuing swarm sent the stock up over $8 per share the next day (closing at $120.43, up from the prior day’s close of $112.29). The dividend payout was for shareholders of record Nov. 7, when the stock closed at $111.03, payable Nov. 20, when the stock closed at $106.87. The stock currently trades almost $7 above the share price at payout and offers investors 50 cents per share each quarter, putting the dividend yield around 1.8%.

But there are companies that regularly pay loyal shareholders a special dividend, like Buckle (NYSE: BKE), which announced their largest special dividend to date, $4.50 per share. For the past five years the company has paid out over $13 per share in special dividends. The substantial dollar amount this time around is most likely the result of possible dividend tax increases in the near future, but the “special” action is anything but. The dividend for shareholders of record Dec. 7 saw the stock close that day at $44.37, closing the following Monday at $42.10. The payout date is Dec. 21, and for anyone considering a possible long-term investment, keeping an eye on these dates offers nice entry spots. Buckle has actually made it part of their annual capital allocation each year to pay a special dividend to their investors, and recent history suggests that is unlikely to change. Not only that, the company pays a respectable 1.9% dividend yield at 20 cents per share each quarter.

There’s no need for long-term investors to go chasing after every announcement of each special dividend. Unless you already owned the stock, the likely upward move has already occurred. But if any of the hundred-plus companies that have declared special dividends prior to the close of business for 2012 happen to be on your watch list, keeping a close eye on the ex-dividend dates and the payout dates could provide a decent point to initiate a long-term investment. Provided you’ve practiced due diligence, and done your homework, you may be snapping up shares of some cash-laden companies on the cheap.

kmet312 has no positions in the stocks mentioned above. The Motley Fool owns shares of The Buckle. Motley Fool newsletter services recommend The Buckle. 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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