Investors have an opportunity to earn special dividends from companies that historically pay them in the fourth quarter. Acquiring these stocks now will reward investors with a dividend yield of 5% to 6%.

Buckle (NYSE:BKE), Capitol Federal Financial (NASDAQ:CFFN), and Commerce Bancshares (NASDAQ:CBSH) each have paid special dividends for the past five years, plus regular dividends. Stockholders who held these companies a year ago reaped rewards. Buckle's special dividend was about 9.5% of its stock price last year, Commerce's was 9%, and Capitol Federal's was 6%.

Each company, once again, could pay a special dividend this year -- although it is possible the dividends won't be as rich as last year. Tax laws changed on Jan. 1, increasing the tax on dividends to 20% from 15% for higher-income taxpayers. That change in tax law prompted companies to dole out more dividends than normal in 2012.

Here's a table with the history of special dividends paid by the three companies, plus my estimate for their 2013 special dividends. My estimate was conservative based on each company's special dividend history and earnings so far in 2013.

Special dividends

Company 2008 2009 2010 2011 2012 2013 est.*
Buckle $3.00 $1.80 $2.50 $2.25 $4.50 $3.25
Capitol Federal $0.11 $0.29 $0.30 $0.70 $0.70 $0.70
Commerce Bancshares 5% stock 5% stock 5% stock 5% stock 5% stock+ $1.43 5% stock

Source: Charles Schwab Research and *my estimate

Midwestern banks
Midwestern banks are coping with slow growth. The number of jobs in Kansas, for example, has only grown 1% year-to-date.

Missouri-based Commerce Bancshares has paid a 5% stock dividend every fall for 19 years. In addition to the stock dividend, the company pays regular, cash dividends, yielding about 2.1%, and sometimes special cash dividends. Last November, it gave a $1.43 special cash dividend on top of the 5% stock dividend. The issuance of more shares outstanding reduces equity per share yet the stock is up 20% over the past five years.

Commerce Bancshares offers full-service banking and lending services to retail and commercial customers, plus provides trust and investment management services. Commerce Bancshares' earnings have improved since the recession of 2008-2009, but this year earnings haven't grown.

With earnings down 5% in the second quarter and 4% in the first quarter,  I expect Commerce to pay another 5% stock dividend this fall, but no special cash dividend.

Capitol Federal Financial has been paying regular dividends and special dividends since it went public in 1999. Capitol Federal is a home-mortgage lender. The bank is a conservatively operated thrift focused on lending to single-family home buyers. Capitol Federal's biggest market is the Kansas City area. The average credit score of borrowers for one- to four-bedroom family homes is above 700, which is considered excellent.

Earnings for Capitol Federal have been steady -- around $0.12 per share quarterly for several quarters. The company most recently posted $0.13 per share in its fiscal third quarter ended July  29. Its regular dividend is $0.30 annually or a yield of 2.4%. The company has paid $0.90 to $1.00 in regular and special dividends every year for about 10 years. I expect Capitol Federal's special dividend to be $0.70 per share, about 5.6% of the current stock price.

Fashionable dividends
Buckle's stock usually jumps in price after the announcement of its special dividend. On Nov. 6, 2012, the company announced that it was paying a $4.50 special dividend alongside its regular $0.20 quarterly dividend.  The stock climbed 7% in the 20 trading days following the announcement. Investors hustled to buy the stock to get the dividend. But after the stock went ex-dividend, meaning investors could no longer get the special dividend, the stock plunged 10% in a couple of days, but rebounded by May. Similar patterns happened in 2011 and 2010.

Use these patterns to make money. Consider buying the stock before the special dividend announcement; consider buying more stock after it goes ex-dividend.

Buckle went public in 1992 and now has a market value of $2.5 billion. The largest owner is an insider: Chairman Daniel Hirschfeld owns 16.2 million shares worth almost $879 million, or 34% of the company. His family started the company in Kearney, Neb., in 1948. Buckle has had the same leadership team in place for many years, including president and CEO Dennis Nelson and chief financial officer Karen Rhoads. This retailer actually grew and prospered throughout the recession of 2008-2009.

I've always wondered why Buckle didn't just raise its regular dividend, but the regular dividend has been $0.80 annually for five years. The yield for the regular dividend is approximately 1.5%.

Buckle could borrow a bunch of money and sweep the nation with another 100 stores, but that is not its style. The company grows slowly, using only experienced in-house trained managers for new stores. Store count increased by nine in 2012 and 11 year-to-date.

The company has no debt and $128 million in cash. Same-store sales have been trending up in the low single digits. Buckle has 451 stores in 43 states. Most of the stores are in malls and college towns. Stores sell a mix of high-quality, on-trend apparel, accessories, jeans, and footwear.

Buckle earned $0.52 per share in the second quarter, up 6% from a year ago. First-quarter earnings were down a penny to $0.78. I expect Buckle to pay a $3.25 special dividend this fall or about 6% of a $54 stock.

Final thoughts
Management at Buckle, Capitol Federal, and Commerce Bancshares like paying special dividends. Special dividends this fall may not be as rich as last year, but receiving cash for holding onto a stock is a good thing. Count me in.

 

Michael Hooper owns shares of The Buckle. The Motley Fool recommends The Buckle. The Motley Fool owns shares of The Buckle. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.