2 Stocks Offering Special Dividends

What is a special dividend? Basically, a company is doing really, really well — so well, it’s going to pay you even more to own it!

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When looking at dividend stocks, investors likely go straight towards the dividend yield. After that, they look at how much that dividend yield really comes to. And there is what you can earn each year from buying shares of this dividend stock, right?

Wrong — at least, in some cases.

There are dividend stocks that also offer special dividends. What are special dividends? Let’s explain and look at some stocks you should consider today.

What are special dividends?

At their core, special dividends are non-recurring distribution of company assets. These are usually done through cash payments to shareholders. But unlike a regular dividend, special dividends are usually larger than normal dividends paid.

These “special” dividends are special because the payments are usually tied to some kind of event. This might be an asset sale, corporate restructuring, a spinoff, or other generator of income. The thing is, most companies don’t offer more than one special dividend in their history.

Now, this is because a special dividend has to come from a very special event. A spinoff or restructuring would have to bring in so much cash that the company pretty much has to give it out to shareholders. Others believe that cash could be used for better purposes, such as expansion or investment, or even just a cash cushion. Even so, there are some Canadian stocks that investors may want to consider for a special dividend.

On offer

First, let’s look at a dividend stock offering up a special dividend for 2024. Retailer Costco Wholesale (NASDAQ:COST) reported that it would be providing a US$15 special dividend for shareholders of record as of Dec. 28, 2023. Of course, that date has come and gone, but I wouldn’t discount the discount stock just yet.

Costco stock has done five special dividends over its history. What’s more, that’s been over the last 12 years alone! These were in 2012, 2015, 2017, and 2020, paying out US$7, US$5, US$7, and US$10, respectively. However, the almost double dividend comes from the company’s cash richness. The bottom line is that it’s just an amazingly well-run company and stock.

With US$7 billion in debt and US$18 billion in cash, the company is a strong dividend stock for short- and long-term investments. It’s offered double-digit earnings growth, up 17% year over year in the first quarter. It now offers a dividend yield of 0.59% for investors, coming in at US$4.08 per share annually.

A potential lead

For those looking for a dividend stock that might have the potential for a special dividend in the future, keep your eye on Granite REIT (TSX:GRT.UN). This industrial real estate investment trust (REIT) has surprised investors with a special dividend in the past. This occurred when disposing of large assets, which the company has been doing as of late.

If there are even more asset sales in 2024, then it could be likely that Granite stock will announce a special dividend. The last one on record was announced Dec. 17, 2018. Shareholders of record on Dec. 31, 2018, received a special dividend of $1.20 on Jan. 15, 2019. So, this could certainly happen again.

That’s especially true as the company continues to find ways of creating capital and scoring through new growth opportunities from its current operations. And given the ongoing demand for industrial properties, growth in dividends and earnings certainly looks likely. For now, you can still grab a dividend yield of 4.47% as of writing from the dividend stock.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Costco Wholesale and Granite Real Estate Investment Trust. The Motley Fool has a disclosure policy.

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