Shanda Games Shares Jumped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: For the second time in two months, Shanda Interactive's (Nasdaq: SNDA  ) gaming unit is rallying. Shares of Shanda Games (Nasdaq: GAME  ) rose as much as 12% after the company announced plans to pay out $285 million in special dividends to domestic and foreign investors.

So what: Holders of Class A and B shares will each receive $0.51 per stub held. Holders of American depositary shares will receive $1.02 per ADS held. The payment amounts to a massive 25% yield as of Friday's close.

Now what: Management justified the payout by pointing to $584 million in net available cash and investments and $275 million in operating cash flow generated last year. Do you believe the special dividend is a smart move? Would you buy shares of Shanda Games at current prices? Please weigh in using the comments box below.

Interested in more information about Shanda Games? Add it to your watchlist by clicking here.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

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Comments from our Foolish Readers

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  • Report this Comment On November 30, 2011, at 5:16 PM, paddlinfaster wrote:

    What am I missing here? Even after TODAY when most of the market went up, you can buy shares in this stock and STILL get more than a 20% didvidend in less than 2 months. TWO MONTHS. TWENTY PERCENT.

    I actually own a tiny bit of this stock & was close to buying a tiny bit more last Friday. I may STILL buy more because, heck, who doesn't like a guaranteed 20% return in 2 MONTHS? But I keep thinking I MUST be missing something! Has any other Chinese stock/company done something like this? Do you think this is some kind of desperation ploy to prop up the stock & if so, why?

    And most of all - WHY isn't everyone else buying? Even if only for a 2 month TRADE?

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