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Editor's Note: As this is a dividend larger than 25% of the market cap, the ex-dividend date is the day after the payment date. If shareholders still have questions, they should contact OXPS directly for clarification on the special dividend dates.
optionsXpress (Nasdaq: OXPS ) recently announced it will be paying a special dividend of $4.50 per share on Dec. 27 to shareholders of record on Dec. 13. At current prices, optionsXpress will have a one-year yield of 26%! That puts its one-year yield higher than the current top high yielders American Capital Agency (Nasdaq: AGNC ) (19%) and Chimera Investment (NYSE: CIM ) (17.6%). While this is a one-time thing, hence the name "special", high yielders can be interesting situations.
One of the more memorable special dividends in recent memory was the special dividend Microsoft (Nasdaq: MSFT ) paid in 2004. It paid $3 a share out of the excess cash it had sitting on its balance sheet. This return of cash could then be used by shareholders who believed in the company to reinvest or for new opportunities.
optionsXpress' situation is slightly different, with interest rates so low and taxes on dividends expected to rise, optionsXpress raised $120 million in debt at a low variable rate. It is using that cash and the $269 million in cash on its balance sheet to pay out the dividend. This is a great for two reasons. One, it signals the company believes it is strong enough to take on debt to pay out a large dividend. Second, it shows management is savvy enough to take advantage of the absurdly low interest rates out there today.
optionsXpress isn't the only company to have recently announced paying out a special dividend. Other companies that announced special dividends recently which you can still buy into include:
RLI (NYSE: RLI ) , a specialty insurance company, trades around $60 a share and is paying a special dividend of $7 per share. The dividend is payable on Dec. 29 to shareholders of record as of Dec. 16 and is expected to total approximately $147 million.
China Digital TV (NYSE: STV ) builds access and control technology for the Chinese TV industry, it's paying a special dividend of $2 per share (shares trade for $8.48 as I write this) to be paid in two installments of $1 each during 2011. Shareholders of record as of the close of business on Dec. 23 will be eligible to receive the dividend. The first installment of the dividend is expected to be paid on or around Jan. 13.
Interactive Brokers (Nasdaq: IBKR ) , one of the top online brokers, is paying a special dividend of $1.79 per share payable on Dec. 23 to shareholders of record as of Dec. 9. Its shares currently trade around $18 per share.
While none of these are recommendations they are a good place to look. Companies paying special dividends believe they will do well in the future, and by collecting the special dividend you have the opportunity to reinvest in the business at a lower price or keep the cash to invest when bad times come around.