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Forbes
5 days ago
- Business
- Forbes
These 5 Special Dividends Are More Than Meets The Eye
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
Yahoo
5 days ago
- Business
- Yahoo
2 Magnificent Dividend Stocks to Buy in June
Coca-Cola is one of the most resilient stocks to hold for the long term, having paid a growing dividend for 63 years. Home Depot has ample opportunities to grow earnings and dividends by serving a $1 trillion home improvement market. 10 stocks we like better than Coca-Cola › Dividend stocks can be a great antidote to market volatility. While these stocks can still experience dips with the broader market, the regular cash deposits made into your account can help you stay optimistic about your financial future. If you're thinking about adding reliable dividend payers to your portfolio right now, here are two industry-leading businesses that could potentially pay you for the rest of your life. Coca-Cola (NYSE: KO) is a staple brand for many households. While it doesn't offer a lot of growth, the stock has held up relatively well against market volatility in recent years. It has an excellent dividend payment record and currently offers an attractive yield that is double the S&P 500 average. At the current quarterly payout of $0.51, the stock's forward dividend yield is 2.85%. The company just raised the quarterly payment for the 63rd consecutive year, indicating a resilient business through economic cycles. Coca-Cola is more than its namesake brand. It owns dozens of brands across juices, tea, energy, and water, so it offers a beverage product for just about any consumer preference. Its product diversity also helps the business generate steady sales year to year. Despite economic uncertainty in the first quarter, Coca-Cola's adjusted revenue grew 6% year over year, with unit case volume up 2%. Tariffs could affect Coca-Cola's financial results this year, but only marginally. Based on what management has seen so far, it expects adjusted earnings to increase 7% to 9% in 2025. Given its trailing 12-month payout ratio of 77%, more earnings growth should support further increases in the dividend. This rate of growth is consistent with management's long-term expectations. While Coca-Cola is a global brand, it still has significant opportunities in emerging markets, where people consume fewer commercial beverage products than in developed countries. The company raised the dividend by 5% this year, and that's a reasonable expectation for its long-term growth in revenue, earnings, and dividends. Coca-Cola stock has been a favorite holding of Warren Buffett for many years and can certainly help you grow your savings. Home Depot (NYSE: HD) is the leading home improvement retailer. Favorable homeownership trends have driven rising demand for its services over the years. This has made the stock a rewarding investment. A $10,000 investment 20 years ago would be worth $151,000 today, including dividend reinvestment. Home Depot has been a solid dividend payer, and it currently offers an attractive yield. Its quarterly payment currently stands at $2.30, bringing the forward dividend yield to an above-average 2.49%. While the housing market can swing with the economy and interest rates, Home Depot has weathered these cycles well. The housing market has been relatively weak the past few years, but Home Depot has maintained steady sales and earnings. Over the past year, it paid out 61% of its earnings in dividends, providing plenty of wiggle room to sustain the dividend in a soft year. Another quality that makes Home Depot a solid income investment is that its average customer earns an average annual income of $110,000, with 80% of its customers owning their home. This can explain why Home Depot reported healthy demand for small home projects last quarter, despite economic uncertainty. The company reported a slight increase in U.S. comparable store sales over the year-ago quarter. Management expects full-year adjusted earnings to be down approximately 2% over fiscal 2024. But in the long term, investors can expect Home Depot to deliver respectable returns. The opportunity in the home improvement market is worth $1 trillion, which leaves a lot of room for growth for a business with annual sales of $162 billion. Returns over the next 20 years will likely be more modest than in the previous few decades, but Home Depot has plenty of opportunities to grow sales and pay dividends for many years. Before you buy stock in Coca-Cola, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Coca-Cola wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $651,049!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $828,224!* Now, it's worth noting Stock Advisor's total average return is 979% — a market-crushing outperformance compared to 171% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 19, 2025 John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot. The Motley Fool has a disclosure policy. 2 Magnificent Dividend Stocks to Buy in June was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
24-05-2025
- Business
- Yahoo
Steady Payouts, Low Profile: Meet This Lesser-Known Dividend Player
Clearway Energy, Inc. (NYSE:CWEN) is a major player in the clean energy sector, operating one of the largest renewable energy portfolios in the US, which includes solar, wind, energy storage, and natural gas projects. The company sells electricity through long-term, fixed-rate contracts, helping it generate steady cash flows that support its dividend payments. Despite its operations, Clearway Energy, Inc. (NYSE:CWEN) remains relatively under-the-radar among dividend-focused investors, largely because it operates quietly behind the scenes. However, it has a strong track record of consistent dividend payments and maintains a healthy cash position. In Q1 2025, it reported $95 million in operating cash flow and $77 million in cash available for distribution (CAFD), both up from the same period in 2024. Clearway Energy, Inc. (NYSE:CWEN) faced turbulence in 2023 and 2024 amid rising interest rates and concerns about slowing renewable energy demand. While the sector has indeed felt the pressure, fears about the company's business may be overblown. Its revenues are backed by long-term contracts, and demand for clean energy from utilities remains strong. With access to capital and a positive long-term outlook, Clearway Energy, Inc. (NYSE:CWEN) expects to grow its earnings and aims to boost its dividend by 5% to 8% annually in the coming years. On top of that, the stock maintains a healthy dividend yield, which stands at 5.76%, as of May 23. CWEN is up by nearly 16% in 2025 so far. While we acknowledge the potential of CWEN as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued dividend stock that is more promising than CWEN but that trades at 10 times its earnings and grows its earnings at double digit rates annually, check out our report about the . READ MORE: and Disclosure. None. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Globe and Mail
18-05-2025
- Business
- Globe and Mail
Is the Schwab US Dividend Equity ETF a Buy Now?
Schwab US Dividend Equity ETF (NYSEMKT: SCHD) does a lot for the fairly tiny expense ratio of 0.06% that it charges. In fact, what it does is likely to be very close to what you might do if you were trying to build a dividend stock portfolio from the ground up. Here's why Schwab US Dividend Equity ETF is worth buying now, and, frankly, most of the time, if you want to outsource your dividend investing work to someone else. What does Schwab US Dividend Equity ETF do? Technically, Schwab US Dividend Equity ETF is an index-tracking exchange traded fund. So, it just buys whatever the index "tells" it to. The real question for investors is, what's the index being tracked, and what does that index do? The first part is easy; the index is the Dow Jones U.S. Dividend 100 index. What it does, however, requires a little more explanation. The first hurdle for getting into the index is that a company must have at least 10 consecutive annual dividend increases under its belt. This is a typical screen used by dividend investors. (Real estate investment trusts (REITs), which are pass-through entities, are removed from consideration.) There are ETFs you can buy that simply stop at this step, but not Schwab US Dividend Equity ETF -- this is just the index's starting point. A composite score is created for each of the companies that pass the 10-year dividend increase screen. The score includes cash flow to total debt, return on equity, dividend yield, and a company's five-year dividend growth rate. Each component of the score looks at something that a dividend investor would likely consider, including financial strength, business performance, dividend yield, and the recent growth trends of the dividend. Again, Dow Jones U.S. Dividend 100 Index, and thus Schwab US Dividend Equity ETF, is doing the work you would be doing if you were buying stocks individually. The 100 highest-scoring stocks get into the index and ETF. They are market-cap-weighted, so the largest companies have the biggest impact on performance. The portfolio is updated annually, so the holdings are always on target with the index's goals. You get all of that work with one, low-cost investment. SCHD data by YCharts Schwab US Dividend Equity ETF is a good buy today, and most of the time As the chart above highlights, Schwab US Dividend Equity ETF has tended to appreciate in value over time. However, notice that the dividend it pays has tended to rise over time, as well. So, you not only get capital appreciation but also a growing income stream. That's going to be a double win for most dividend investors, especially if they are tired of trying to pick stocks and would rather just live their lives. There will, of course, be better and worse times to buy Schwab US Dividend Equity ETF. However, its dividend yield, at around 4%, is currently toward the high side of its historical yield range. That hints that now is a "better" time to step aboard the ETF. SCHD Dividend Yield data by YCharts That said, investors should probably always have Schwab US Dividend Equity ETF in the back of their minds. Its investment approach is so similar to what most dividend investors actually do in the real world that it is an easy solution if you want to add diversification to your portfolio or if you simply want to give up the chore of investing. All in, it is a strong ETF candidate just about all of the time. Schwab US Dividend Equity ETF is looking attractive today Part of the reason why Schwab US Dividend Equity ETF's yield is so high right now is that its largest sector exposure is energy. Oil prices have dipped, and that's pushed these stocks lower, which has, in turn, hampered Schwab US Dividend Equity ETF's performance. Don't let that stop you from buying it; the energy sector goes up and down fairly regularly. When energy prices eventually recover, as they always have in the past, the large exposure to energy will no longer be a headwind and the historically high yield here could be a thing of the past. Should you invest $1,000 in Schwab U.S. Dividend Equity ETF right now? Before you buy stock in Schwab U.S. Dividend Equity ETF, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Schwab U.S. Dividend Equity ETF wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $642,582!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $829,879!* Now, it's worth noting Stock Advisor 's total average return is975% — a market-crushing outperformance compared to172%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of May 12, 2025
Yahoo
11-05-2025
- Business
- Yahoo
Income Investors Should Know That Karat Packaging Inc. (NASDAQ:KRT) Goes Ex-Dividend Soon
It looks like Karat Packaging Inc. (NASDAQ:KRT) is about to go ex-dividend in the next four days. Typically, the ex-dividend date is one business day before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase Karat Packaging's shares on or after the 16th of May will not receive the dividend, which will be paid on the 23rd of May. The company's next dividend payment will be US$0.45 per share, on the back of last year when the company paid a total of US$1.95 to shareholders. Looking at the last 12 months of distributions, Karat Packaging has a trailing yield of approximately 6.4% on its current stock price of US$30.26. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing. We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Karat Packaging is paying out an acceptable 73% of its profit, a common payout level among most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out more than half (64%) of its free cash flow in the past year, which is within an average range for most companies. It's positive to see that Karat Packaging's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut. View our latest analysis for Karat Packaging Click here to see the company's payout ratio, plus analyst estimates of its future dividends. Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Karat Packaging has grown its earnings rapidly, up 68% a year for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards. Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last two years, Karat Packaging has lifted its dividend by approximately 136% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see. Should investors buy Karat Packaging for the upcoming dividend? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. However, we'd also note that Karat Packaging is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. In summary, it's hard to get excited about Karat Packaging from a dividend perspective. While it's tempting to invest in Karat Packaging for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 1 warning sign for Karat Packaging you should be aware of. A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
