Special dividends are unscheduled one-time cash rewards companies pay to their shareholders – and they are icing on the cake for income investors.
These special payments are sometimes triggered by windfalls from an unusual event such as an asset sale, but more commonly occur when the company's earnings are exceptionally strong and the firm has more cash than it needs to fund its business.
Special dividends fueled by extraordinary earnings are especially attractive to investors since these tend to occur more frequently and are often paired with a rising regular dividend.
The combo of fixed-plus-variable dividend (which combines a fixed dividend payment along with a variable dividend that is adjusted based on market conditions) creates a gift to shareholders mostly ignored by financial databases, which count only regular dividends to calculate yield.
Here are 10 standout companies that paid special dividends in 2021. Not only did these firms reward shareholders with bonus payouts last year, but they have also paid frequent special dividends in the past. What's more, many of the names featured here boast sizable and increasing free cash flows, fortress-like balance sheets and steadily rising regular dividends.
Data is as of Feb. 15. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price. Stocks are listed in order of lowest to highest special dividend payout.
- Market value: $3.0 billion
- Dividend yield: 3.0%
- Most recent 12-month special dividend (per share): $0.08
- Most recent annualized dividend (per share): $0.56
Fulton Financial (FULT, $18.57) owns Fulton Bank, a regional bank with $26 billion in assets that operates approximately 200 branch locations across Pennsylvania, Maryland, Delaware, Virginia and New Jersey. The bank offers residential and commercial mortgages, wealth management and a variety of other banking services to businesses and retail customers.
Fulton Bank has delivered steady single-digit growth in both loans and deposits since 2017. It plans to grow profits by expanding its footprint in urban markets like Baltimore and Philadelphia, consolidating and upgrading its branch network and improving its efficiency ratio.
The bank's average interest-earning assets rose 8.4% in 2021 to $24.4 billion and average interest-bearing deposits increased .03% to $14.4 billion. However, net interest margins declined modestly due to lower yields. Asset quality remained strong; non-performing loans were just 0.83% of total loans and FULT had a low net charge-off rate of 0.07%.
Fulton Financial's earnings per share (EPS) rose 50% in 2021, fueled by strong gains on investments. And at year-end, the bank had excess capital on its balance sheet that exceeded regulatory minimums by 14%.
Wall Street analysts, who have a consensus Hold rating on the financial stock, think the bank may encounter headwinds in 2022 from reducing mortgage refinancing activity tied to rising interest rates. As such, they are forecasting a 13% decline in EPS for the current fiscal year.
And while this bank earns poor marks for dividend growth, it has solid grades for dividend consistency and yield.
Fulton Financial increased its regular dividend by 8% last March, which was its first dividend hike in three years. The bank has a more impressive track record for special dividends, which have been paid eight years in a row and doubled in 2021 to 8 cents per share.
Main Street Capital
- Market value: $3.0 billion
- Dividend yield: 6.1%
- Most recent 12-month special dividend (per share): $0.10
- Most recent annualized dividend (per share): $2.58
Main Street Capital (MAIN, $42.80) is a business development company (BDC) that invests in the debt and equity of middle-market businesses (i.e., between $10 million to $150 million of annual sales). The firm provides capital for business expansion, acquisitions, management buyouts and recapitalizations. Main Street Capital's portfolio shows investments in 177 companies collectively valued at $5.1 billion.
The company earns BDC income from interest on debt investments and dividends, and capital appreciation and realized gains on equity holdings. Main Street Capital is internally managed, which the firm says minimizes operating costs and better aligns its interests with shareholders.
In the BDC industry where broad swings in annual performance are common, Main Street Capital stands out for its steady portfolio growth, generally rising DNII (distributable net investment income, a BDC earnings measure) and recurring monthly dividends. MAIN shares have outperformed industry peers and the S&P 500 since its 2007 initial public offering (IPO), generating total returns of 789% through the end of September, versus a 610% return for industry peers and 273% for the S&P 500.
Main Street Capital pays monthly dividends, which have risen 95% since the fourth quarter of 2007 – the first quarter after the company first went public. In late November, MAIN hiked its monthly dividend again, by 4.9% year-over-year to 21.5 cents per share.
Since its IPO, Main Street has paid cumulative dividends of $32.82 per share, which includes $4.14 per share in special dividends. Investors should note, however, that like other BDCs, Main Street Capital sometimes pays dividends that exceed earnings.
Main Street Capital's operating performance tends to mirror the broader economy. The firm's earnings rose at mid-teen rates in 2017 and 2018, declined 11% in 2020, and rebounded 31% during the first nine months of 2021. Rising interest rates in 2022 may create tailwinds for the BDC since most of its debt investments are floating rate and its debt obligations are fixed rate.
Wall Street analysts appreciate the company's above-average performance, but consider MAIN shares somewhat pricey. This stock trades at 16.5 times forward earnings, which is a nearly 40% premium to industry peers.
Camping World Holdings
- Market value: $1.5 billion
- Dividend yield: 6.0%
- Most recent 12-month special dividend (per share): $0.14
- Most recent annualized dividend (per share): $2.00
Camping World Holdings (CWH, $33.24) is America's largest recreational vehicle (RV) retailer. The company has been selling and servicing RVs since 1966 and offers two product brands (Camping World and Good Sam) through 185 dealership locations nationwide.
Demand for RVs is surging. The RV Industry Association estimates that 72 million Americans will take an RV trip this year, up from 61 million in 2021. Plus, economic research firm ITR Economics recently increased its forecast for shipments of new RVs to exceed 600,000 units this year.
Camping World Holdings has grown sales 14% annually on a trailing 12-month basis since 2016. This has occurred through a strategy focused on expanding its geographic footprint and selling RV-related services such as extended warranties, travel insurance, roadside assistance and campground bookings.
The company supplements organic growth with acquisitions and recently announced purchases of RV dealerships in Kentucky and Michigan, as well as a new development in Missouri.
And growth for CWH is strong – making it one of the best consumer discretionary stocks for 2022. In its September quarter, Camping World Holdings' revenues rose 14% year-over-year, net income grew 22% and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) jumped 33%.
The company is guiding for fiscal 2021 adjusted EBITDA of $922.5 million at the midpoint – 63% more than the year prior. Adjusted EBITDA growth over the past five years has ranged around 27% annually.
The company shares its steadily rising cash flow with investors. CWH recently boosted its share repurchase program to $200 million after doubling its regular cash dividend last August.
In addition to big dividend hikes, Camping World Holdings paid a 14 cents-per-special dividend in 2021. Special dividends have been paid every year since 2016 and are typically distributed every quarter.
- Market value: $234.0 million
- Dividend yield: 3.7%
- Most recent 12-month special dividend (per share): $0.20
- Most recent annualized dividend (per share): $0.92
Through Territorial Savings Bank, Territorial Bancorp (TBNK, $25.05) provides mortgages, loans and personal and business banking services to customers across Hawaii. The company has 29 branch offices in that state and is headquartered in Honolulu.
A 2019 study ranked Territorial Bancorp as the 5th largest bank in Hawaii, based on its loan portfolio and a 2021 Newsweek survey rated it the best bank in that state.
Territorial Bancorp's principal interest-earning asset is its portfolio of one- to four-family residential mortgages, which comprise 97% of loans. These types of mortgages tend to be low risk, as evidenced by the bank's non-performing loans at just 0.2% of the portfolio.
An additional layer of safety comes from loan amounts averaging just 45% of the appraised value of real estate, making defaults unlikely. However, most of the bank's loans are fixed rate with long maturities. This suggests that rising interest rates are unlikely to create much of a tailwind for Territorial Bancorp in 2022.
Because of its heavy reliance on tourism, Hawaii was one of the states hardest hit by COVID-19. While the state's economic recovery was quicker than expected last year, Territorial Bancorp is encountering COVID-related staffing challenges that forced the temporary closure of two branches this year.
Declines in the bank's interest income were only partially offset by lower interest expense last year, causing EPS to decline by 5% in 2021. Consensus analyst estimates forecast EPS falling another 10% in 2022.
Still, Territorial Bancorp is aggressively repurchasing shares to enhance earnings growth and recently completed its 10th repurchase program since its 2009 IPO. Through these programs, the bank has bought back 32% of its outstanding stock.
Territorial Bancorp has paid dividends 11 years in a row, but hasn't raised the amount of its quarterly payout since 2019. However, the bank has paid special dividends in nine of the last 12 years, including 2021 when a 20 cents-per-share special dividend was distributed.
Cohen & Steers
- Market value: $3.9 billion
- Dividend yield: 2.2%
- Most recent 12-month special dividend (per share): $1.25
- Most recent annualized dividend (per share): $1.80
Global asset manager Cohen & Steers (CNS, $81.82) specializes in real estate, infrastructure and natural resource stocks, as well as preferred equities. The firm manages approximately $107 billion in assets and has posted 10 consecutive quarters of net fund inflows to its portfolio.
Approximately 78% of the firm's business is in North America, but Cohen & Steers also has offices in Japan and Europe. Its business mix is approximately 48% open-end investment funds, 23% from advisory fees, 12% closed-end funds (CEFs) and 18% from Japan and other subsidiaries.
Its largest asset class, U.S. real estate investment trusts (REITs), returned 41% last year and was the best-performing sector of the S&P 500. Cohen & Steers anticipates that rising inflation and interest rates will fuel outsized REIT gains for a second straight year in 2022.
Roughly 99% of Cohen & Steers managed funds outperformed benchmarks last year and 100% of its managed funds have beat competitors on a three and five-year basis. Morningstar has four-and five-star ratings on 86% of the company's managed funds.
Net inflows saw a roughly 12% organic growth rate in 2021, which helped fuel a 57% increase in EPS to $4.03. Consensus analyst estimates forecast earnings rising to $4.28 in 2022 and $4.62 in 2023.
Cohen & Steers has increased its regular dividend 12 years in a row and with a nearly 12% annual growth rate over the last five years. Regular dividends are frequently accompanied by special dividends, which have been paid 11 years in a row, in amounts ranging from 50 cents per share (2015 & 2016) and $2.50 per share (2018).
Ethan Allen Interiors
- Market value: $640.1 million
- Dividend yield: 4.6%
- Most recent 12-month special dividend (per share): $1.50
- Most recent annualized dividend (per share): $1.16
Ethan Allen Interiors (ETD, $25.30) manufactures and sells luxury home furnishings. All of its products are manufactured under the Ethan Allen brand, most are handmade or hand-assembled, and roughly 70% of products are custom-designed and built for customers.
Ethan Allen Interior operates 300 showrooms globally, a mix of both independently owned and company-owned stores, and manufactures its furniture at nine factories across the U.S., Mexico and Honduras.
The company's sales and earnings have rebounded strongly coming out of the pandemic. In fiscal 2021, which ended June 30, written orders in the retail segment rose 48% year-over-year, sales grew 16% and EPS jumped to $2.37 from 52 cents in the year prior. ETD benefited from pent-up demand, strong backlog and several new stores.
Thanks to manufacturing that is largely U.S.-based, Ethan Allen Interiors has been less affected by supply-chain challenges than some competitors. Demand for its furniture has continued to build this year, with sales up 18% and earnings improving 67% in the first six months of fiscal 2022. Consensus analyst estimates look for 38% EPS growth in fiscal 2022.
Ethan Allen Interiors has paid dividends 25 years in a row and boosted its payout by 14%, on average, annually over the last five years. The company's last dividend hike was 16% in November.
The company began paying special dividends in 2018, but skipped the additional payout in 2020. Payments increased to $1.50 per share last year from $1.00 per share in 2019. Payout of its regular dividend is prudent at 34% of earnings, creating flexibility for future hikes and more special dividends.
Fears that rising inflation will hurt furniture industry margins have caused ETD shares to recently decline. At present, ETD stock is valued at a lowly 8 times forward earnings, which is roughly 50% below its five-year historical average multiple.
Old Republic International
- Market value: $8.2 billion
- Dividend yield: 3.4%
- Most recent 12-month special dividend (per share): $1.50
- Most recent annualized dividend (per share): $0.88
Old Republic International (ORI, $26.81) is the country's third largest provider of title insurance and a major player in specialty property & casualty insurance across four business units.
Its specialty lines include commercial vehicle and cargo insurance (from Great West Casualty), auto service, aerospace and professional liability coverage (ORINSCO), workers' compensation (PMA) and policies targeting the forestry, oil and gas and construction industries (BITCO). The company's business mix is 51% specialty property & casualty and 44% title insurance.
The specialty property & casualty business enjoys 90%+ customer retention rates and is known for underwriting skills that have produced combined ratios averaging 96% over the last 15 years. Its title business benefits from proprietary technology, low-cost distribution through independent agents, low 90s combined ratios and a 15% market share.
Last year, ORI's revenues rose 18%, EPS grew 40% and cash dividends increased 29%. Most of the growth came from the title insurance business, where premiums increased 34%, fueled by low interest rates and a robust real estate market. The company's 2021 combined ratio was 90%, down from 93% one year ago.
Old Republic International has one of the best dividend records among publicly traded firms. The company has paid cash dividends without interruption for 80 years and hiked annual dividends in each of the last 40 years. ORI began paying special dividends in 2018 and has paid one in four of the past five years. Special payments grew from $1.00 per share in 2019-2020 to $1.50 per share last year.
- Market value: $34.8 billion
- Dividend yield: 3.8%
- Most recent 12-month special dividend (per share): $1.53
- Most recent annualized dividend (per share): $4.00
A new name addition to the special dividend payers list is independent oil and gas driller Devon Energy (DVN, $51.42). The company is one of America's largest independent energy producers. It owns high-quality producing properties in the Delaware Basin, which account for 70% of production volume, as well as the Powder River, Anadarko and Williston basins and Eagle Ford. Current production is a mix of 50% oil, 26% natural gas and 24% natural gas liquids.
Production volume from the company's Delaware Basin wells rose 39% during the first nine months of 2021. Rising production is creating efficiencies for Devon Energy that are driving the company's per-barrel production costs steadily lower.
At its current drilling pace, Devon Energy estimates it has 10 years of low-risk oil inventories. Upside to its estimates may come from appraise revisions, drilling optimization programs and rising energy prices.
Some analysts are referring to Devon Energy as the new paradigm for the oil industry. DVN is prioritizing free cash flow growth over production gain, which it plans to achieve via 5% annual oil volume growth and maintenance level capital spending.
With oil prices currently ranging around $80 per barrel to $90 per barrel and breakeven costs at $30 per barrel, Devon Energy is likely to generate significantly increased free cash flow on even modest volume gains.
DVN reduced debt by $1.2 billion during the first nine months of 2021 and offers a fortress-like balance sheet. The company has signaled its commitment to shareholder returns via a recently initiated $1 billion share repurchase program and a new dividend policy focused on distributing fixed-plus-variable dividends totaling 50% of the firm's excess free cash flow.
Devon Energy's fixed-plus-variable dividend payout increased 71% in the third quarter. Regular dividends have risen four years in a row and at a 14% rate over three years. The company began paying special dividends two years ago and grew its special dividend nearly fivefold in 2021.
Investors appear to like the new dividend strategy. DVN shares were among the best-performing in the S&P 500 last year, up roughly 180% and gaining another 17% year-to-date in 2022.
Barclays analyst Jeanine Wai reiterated her Overweight (Buy) rating on the energy stock in January. The analyst cited the transparency of the company's cash return model and high-quality inventory as reasons to own shares.
- Market value: $1.9 billion
- Dividend yield: 3.6%
- Most recent 12-month special dividend (per share): $5.65
- Most recent annualized dividend (per share): $1.40
The Buckle (BKE, $38.41) is a specialty retailer of casual apparel and footwear, operating over 440 stores across 42 states. Denim items make up a large percentage of its sales; the company offers its own exclusive denim brand – BKE.
Casual clothing is one of the few apparel categories that performed well during the pandemic, as stay-at-home Americans opted for more relaxed and comfortable attire. Many industry experts believe that trends favoring more casual dress are permanent and likely to lead apparel sales for the foreseeable future.
The Buckle has crushed consensus analyst estimates for both its top and bottom line six quarters in a row. In its most recently reported quarter, sales rose 27.3% to $319.4 million and beat analyst estimates by more than $50 million. EPS was nearly as strong, up 48% to $1.26 and exceeding consensus estimates by 34 cents. Nine-month 2021 sales grew 57%, same store sales jumped 57% and EPS nearly tripled.
Despite strongly rising sales and earnings, BKE shares are down 9% for the year-to-date. The stock trades at a lowly 8 times forward earnings, which is roughly 40% below industry peers.
The Buckle has hiked dividends three years in a row, including a 6% quarterly dividend increase in December. The company also rewarded its investors with a huge $5.65 per share special dividend – its largest ever. Special dividends are nothing new for BKE, though. It has paid one every year since 2014.
American Financial Group
- Market value: $11.8 billion
- Dividend yield: 1.6%
- Most recent 12-month special dividend (per share): $26.00
- Most recent annualized regular dividend (per share): $2.24
American Financial Group (AFG, $139.37) provides specialty property and casualty insurance through its Great American Insurance Group. The company is a leading insurer of agricultural, transportation and marine businesses. Its specialty casualty business lines include workers' compensation, professional liability, surety, excess and surplus and lender services insurance.
AFG generates half of its annual premiums from companies that rank among the top 10 in their respective industries. American Financial Group's risk management expertise and cost discipline is evidenced by its low combined ratio, which has stayed below 94% eight years in a row and has remained below peers for more than a decade.
American Financial Group is one of only four insurance companies rated "A" (Excellent) or better by credit rating agency A.M. Best over the past 110 years. The company is currently rated "A+" by A.M. Best and S&P Global and "A1" by Moody's.
A high policy renewal rate and robust earnings contributions from the company's alternative investment portfolio helped American Financial Group nearly double core EPS during the September quarter and the company raised full-year earnings guidance by 18%.
American Financial Group increased its regular dividend 12% in 2021, marking its 17th consecutive year of dividend growth. AFG also paid five special dividends that together totaled $26 per share. The company has paid a sizable special dividend every year since 2012.
Lisa currently serves as an equity research analyst for Singular Research covering small-cap healthcare, medical device and broadcast media stocks.
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