These 5 Special Dividends Are More Than Meets The Eye

Forbes

01-06-2025

Young businessman working on laptop at home.
Most mainstream financial websites are not 'smart enough' to include special dividends. The yields they display reflect plain ol' quarterly or monthly payouts.
For most stocks this does not matter. But for a select few 'special payers' this is a costly oversight. One that we can capitalize on as thoughtful contrarians.
In a moment we'll discuss five special dividends. The vanilla screens say they pay as little as 3.2% but in reality they dish up to 13.8%!
What exactly is a special dividend payment?
It is a one-time cash payout, often the result of a massive cash influx from, say, selling off part of the company or having an unusually profitable year.
Usually it is a one-shot deal. But it can be a regular thing.
Let's consider chicken producer Pilgrim's Pride (PPC), which recently paid a $6.30 per share special dividend. This is a tremendous 12.7% yield. That's amazing for people who held PPC at the time, but given the company's dividend history, it's likely this is it:
PPC Dividend
PPC is a classic example of a one-time payer. We are looking for exceptions—the one-time payment that happens every year! These are 'regular' special dividends, sometimes called 'supplemental dividends,' that the company pairs with a regular dividend they know they can afford.
Example: ABC Inc. pays 25 cents per share quarterly, but at the end of the year, it pays out 50% of its free cash flow as a supplemental dividend. That dividend still might vary—say, $1 in 2023, $1.50 in 2024, and $1.25 in 2025—but it's extra yield on top of what it can afford to pay on the regular.
In some cases, these special dividend payers can be quite generous. Let's take these 3.2%-11.3% yielders that actually pay out 9.0%-13.8% once we include their special distributions:
Buckle (BKE)Stated Dividend Yield: 3.2%Actual Dividend Yield (With Specials): 9.0%
Buckle (BKE) is a mid- to high-end fashion retailer that's primarily known for its jeans, but it also sells all sorts of apparel, activewear, swimwear and accessories.
Fashion stocks have always been fickle, but post-COVID, they've been downright counterintuitive. Numerous 'mall retail' stocks found themselves slowly declining in the years preceding the pandemic, only to find new life despite COVID broadly knocking brick-and-mortar retail on its tail. That includes the Buckle, whose top and bottom lines have dipped from their post-COVID highs but are still far better than what the store delivered for years prior to the pandemic.
Looking at its regular dividend over the past decade or so, the difference is hard to notice—a couple of small raises in 2021, but that's it. However, that's because Buckle's dividend has long been unlike its fashion retail brethren. The company prefers to pay a modest regular quarterly dividend, then top it up each year with sometimes spectacular special dividends that boost BKE's yield by double, triple, sometimes even more.
Naturally, the rub is that, by virtue of offering massive special dividends, the amount of income we collect from Buckle has the potential to shift enormously from one year to the next—even if the specials have been fairly consistent of late, and even if operational results are largely expected to remain steady over the next couple of years.
Even the potential for income volatility isn't great for retirement planners, but for more adventurous investors, it's a secret store of upside that most people will typically overlook.
Amerisafe (AMSF)Stated Dividend Yield: 3.3%Actual Dividend Yield (With Specials): 9.7%
Amerisafe (AMSF) is a relatively unusual insurer that deals in workers' compensation. The company operates in 27 states and deals in 'high-hazard' industries such as construction, trucking and agriculture.
Anyone who wants to invest in an industry with consistent profits should sprint away from the insurance space. AMSF is actually relatively stable compared to, say, P&C insurance, where even good operators may occasionally suffer annual losses. But even then, Amerisafe's bottom line is a moving target.
Which makes a regular-and-specials program an extremely responsible way to manage the dividend.
AMSF pays a modest (but growing!) quarterly dividend that typically yields around 3%. Then every year, usually in December, it will pay a special dividend with whatever profits it can spare. Like with Buckle, this payout usually doubles or triples the amount of income its shareholders collect in a given year.
Again, retirees can't plan their budgets around dividends like Amerisafe's. But consider this: AMSF's 2024 special dividend was the company's lowest in roughly a decade, and it still boosted the stock's total yield to nearly 10%. With that level of dividend, we don't need much positive price action to have a great annual return.
I'd keep an eye on that bottom line, though. AMSF's profits, which have already slid for a couple years now, are projected to thin this year and next, too.
One area of the market that's rife with 'regular' special dividends is the business development company (BDC) community.
These companies share a lot in common with real estate investment trusts (REITs): they were both created by Congress, they both exist to allow regular investors to invest in an otherwise difficult-to-reach asset, and they both are required to pay out at least 90% of their taxable income in the form of dividends.
But BDCs invest in dozens if not hundreds of small businesses: not exactly a hotbed of stability and reliability. So in the BDC space, we'll frequently see fairly generous regular dividends complemented with specials that take already good yields and make them downright great.
Gladstone Investment Corp. (GAIN)Stated Dividend Yield: 6.4%Actual Dividend Yield (With Specials): 14.3%
Gladstone Investment Corp. (GAIN) is part of my favorite Wall Street family: the Gladstones! This group of businesses also includes another publicly traded BDC, Gladstone Capital Corp. (GLAD), as well as a pair of publicly traded REITs: Gladstone Land Corp. (LAND) and Gladstone Commercial Corp. (GOOD).
GAIN's target portfolio company will generate $4 million to $15 million in annual EBITDA, have a proven business model, stable cash flows and minimal market or technology risk. As far as BDCs go, GAIN has a narrower portfolio than most, at just 25 companies—mostly manufacturing, business services and consumer services firms, but a few consumer product specialists, too.
What sticks out most about Gladstone Investment Corp., however, is its willingness to deal in equity. Most BDCs will typically only have 5% to 10% exposure to equity, but GAIN's target mix is 25% equity/75% debt.
This is essential to GAIN's 'buyout' strategy. Gladstone Investment typically provides most (if not all) of the debt capital along with a majority of the equity capital. Its debt investments allow it to pay out a still-high regular dividend, but then it also pays out (extremely variable) supplemental payouts when they realize gains on equity investments.
To wit, GAIN's regular monthly dividend accounts for 6% worth of yield, but a 54-cent special dividend to be paid in June and a 70-cent distribution last October work out to an additional 8.3% in yield!
That said, Gladstone's specials are all over the place. The company paid three in 2022 and five in 2023, but just one in 2024 and (so far) just one in 2025.
Nuveen Churchill Direct Lending Corp. (NCDL)Stated Dividend Yield: 11.3%Actual Dividend Yield (With Specials): 13.8%
Nuveen Churchill Direct Lending Corp. (NCDL) is among a handful of other BDCs, such as Goldman Sachs BDC (GSBD) and Carlyle Secured Lending (CGBD), that's connected from a big-name asset manager with a sterling reputation. In this case, NCDL is tied to both fund manager Nuveen, as well as its parent TIAA.
The fund's external manager—Churchill, a Nuveen affiliate—invests the BDC in senior secured loans to private equity-owned middle market companies in the U.S. The $2.1 billion portfolio is 210 companies strong right now. The vast majority of holdings (91%) are first lien loans, though Nuveen Churchill Direct Lending also deals in second lien debt, subordinated loans and equity co-investment.
This is a relatively young BDC that has only been in existence since 2018, and it just went public in 2024. I wrote plenty about the company in a September column, but here, I want to focus on the payout.
Nuveen Churchill Direct Lending has come out of the gate with a regular-and-specials format. The regular quarterly dividend has been set at 45 cents per share, and it has so far paid an additional 10-cent special in every quarter since its IPO. That's a strong double-digit yield base with, at least for now, a meaningful 2.5 percentage points in special sweeteners.
The special distributions were declared in connection with the IPO, and April's 10-cent payout was the final dividend in that tranche. Indeed, NCDL's streak might stop this summer—based on its previous activity, any special dividends to be paid in July likely would have been announced in April.
If nothing else, investors should keep their eye on NCDL over the next few quarters to see whether these specials were a one-off event or something the BDC will come back to following strong financial results.
Also, NCDL is young, so it's difficult to tell where its 'normal' valuation range will lie, but for now, the BDC is trading at an 11% discount to NAV.
Barings BDC (BBDC)Stated Dividend Yield: 11.3%Actual Dividend Yield (With Specials): 12.9%
Barings BDC (BBDC) is the cheapest of these three BDCs, trading at an 18% discount to NAV right now.
The Barings name might not mean much to some readers, but longtime BDC investors will surely remember the name 'Triangle Capital.' That's what the company was known as until August 2018, when the company rebranded following years of writing off bad investments and hacking away at its dividend.
But it wasn't just a rebrand—it was a new lease on life. Global financial services firm Barings became an external advisor and overhauled BBDC's portfolio.
Today, Barings primarily invests in senior secured private debt investments in 'well-established' middle-market companies across numerous industries. Target companies for its sponsor-backed investments (issuers owned by private equity firms), the largest part of its business at 75%-85% exposure generally, generate between $15 million and $75 million in EBITDA annually.
It also has smaller exposure to non-PE-owned businesses, as well as a pair of middle market first lien loan originators, Eclipse Business Capital and Rocade Capital.
Meanwhile, about 70% of its investments are first lien loans, though it also has exposure to second lien, mezzanine, equity, structured, and joint venture investments.
We've booked gains in BBDC twice through our Dividend Swing Trader service, so I frequently have my eye on this one for short- and long-term opportunities alike.
So I was pleased to see when Barings made a splash in Q1. After a few years of dividend growth, the company's quarterly dividend had been stuck at 26 cents per share since mid-2023. However, in February, Barings announced it would pay 5-cent special dividends across the first three quarters of 2025 'based on these strong results, our confidence in our portfolio, and the momentum we have seen so far in 2025.'
While I'd prefer growth in the 'stickier' regular dividend, this is a welcome development. The company hasn't made 'top-up' specials since 2014 and 2015. If BBDC makes this a lasting habit, its already stellar dividend will become even tastier. I'll be keeping a close eye on the stock over the next couple of quarters to see if it extends this line of specials into the end of 2025 and into 2026.
Brett Owens is Chief Investment Strategist for Contrarian Outlook. For more great income ideas, get your free copy his latest special report: How to Live off Huge Monthly Dividends (up to 8.7%) — Practically Forever.
Disclosure: none