What makes something special? It’s irregular, a one-time occurrence or greater than what is usual. Special dividends check all those boxes.
When you invest in a stock, the company you invested in will sometimes give a normal dividend. These are small payments, usually every quarter.
Special dividends are much less common than normal dividends. Not as many companies have them and they usually come as surprises to investors. Another great facet of special dividends is they are typically larger amounts than normal dividends.
Investopedia provides a good description of special dividends:
“A special dividend is a non-recurring distribution of company assets, usually in the form of cash, to shareholders. A special dividend is usually larger compared to normal dividends paid out by the company and often tied to a specific event like an asset sale or other windfall event. Special dividends are also referred to as extra dividends.”
Occurrence and Amount
The thing that makes special dividends “special” is that they are unpredictable.
Most companies pay normal dividends every quarter. They have an ex-dividend date and a record date to help investors know when to purchase the stock to qualify for the dividend. Special dividends are not on a consistent basis. They can be announced at any time, if ever announced.
Unlike normal dividends, which are usually the same amount each quarter, special dividends can be any amount. Companies that have special dividends differ in an amount from a few cents to several dollars.
Special Dividends vs. Normal Dividends
| Normal Dividend | Special Dividend | |
|---|---|---|
| Timing | Quarterly | Sporadic |
| Value | Can be easily found for any company that pays them | Unknown until announced |
| How many companies participate? | 84% of companies in the S&P 500 | Not many |
| Should they be expected? | Yes, usually, for large, established companies that are not high growth or technology stocks | No, they usually shouldn’t be considered when deciding on companies to invest in |
Companies That May Have Special Dividends
Similar to normal dividends, older, more established companies are more likely to pay a special dividend than newer, growth companies. By paying a special dividend, companies are choosing to give cash to shareholders instead of reinvesting that money into the company itself to grow for the future.
Back in 2004, Microsoft paid a special dividend to the surprise of many. While shareholders were happy to receive the cash payment, they were curious why Microsoft did not use the money to help generate future revenue.
While they come as surprises, your best chance of getting a special dividend is from a company that has paid them in the past.
- Amerco — The parent company of U-Haul, they are known for their special dividends. Instead of regular dividends, they pay out special dividends, usually every year, and sometimes three times a year. Their latest was announced in August at $0.50 a share.
- Costco — In 2015 the warehouse club provided a special dividend of $5.00 and in 2017 a special dividend of $7.00. Costco has not made any recent announcements saying that they will have a special dividend soon, but investors have debated whether or not they will have one in the near future.
- Paccar — They are one of the largest manufacturers of trucks and have a history of special dividends. In addition to their quarterly dividends, they have provided shareholders with a larger, special dividend in 2019, 2018, 2017, 2014 and 2011. There has not been any announcement or news on if they will provide a special dividend in 2020.
Final Thoughts
In summary, normal dividends are expected. Investors can find out the amount and when they will be paid. Most companies give normal dividends. Special dividends on the other hand are rare; most companies never give them out. When they are given out, it is a surprise and a one-time occurrence.
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