Talk about your bait and switch. Domino's Pizza
Domino's will be sending its shareholders a special one-time dividend next month. At $13.50 a share, that should be enough to cover your next pizza order. However, watching the stock shoot up 7% in after-hours trading last night on the news is troublesome. The company had indicated two months ago that it was digging into a recapitalization strategy that would result in a chunky disbursement. So who exactly is flying into the stock now? Are they buying in for the right reasons?
Do investors really think there's such a thing as a free lunch on Wall Street? When May 7 comes around, the stock should open $13.50 lower to adjust for the payout. It wouldn't surprise me to see the stock shed more than that.
The company left behind after the beefy distribution will have a sorrier balance sheet as a result of the dividend with taxable implications. You also have institutional investors, like the insanely overpriced Cornerstone Total Return
These one-time dividends are becoming pretty popular.
(NASDAQ:SHOO)did it, too.
I know that some sharp fellow Fools like Brian Lawler can appreciate these one-time payouts. The payouts may even be necessary in some cases. However, I just have to warn any investor who buys into a one-time dividend under the false assumption that the stock will automatically work its way back to its former share price.
There is no free lunch. If you don't believe me, walk into your local Domino's and ask someone.
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Longtime Fool contributor Rick Munarriz enjoys pizza at the major chains, but also from many of the mom-and-pop pizzerias around town. He does not own shares in any company mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.