Investors can make big money from unknown and misunderstood companies. In the past few weeks, I found three dividend stocks whose special situations make them great opportunities for investors. I especially love dividend special situations, since the market quickly reacts to a raised dividend, and often unfairly punishes stocks whose dividends drop. Investors who take the time to understand these situations can profit, while most others will only find out about the opportunity after the fact.
Let's get started:
1. Spinoff and new dividend, oh my!
The parent company will consist of pipelines, midstream assets, and general and limited partner interests in El Paso Pipeline Partners LP
2. Increased dividend from an undervalued subsidiary
British telephone giant Vodafone
However, this situation will soon change. Verizon Wireless' debt is nearly gone, which means the company will likely soon begin paying dividends to its parents. This increased cash flow will allow Vodafone to increase its own dividend, at which point the market should revalue the company upward.
3. Rock-solid balance sheet and a new dividend
In the last 10 years, my final candidate has been wildly mispriced more than once. In 2000, its shares traded for more than 200 times earnings. Today, they trade for just 10 times earnings after adjusting for net cash.
The company is Cisco
Just a few weeks ago, the company initiated a quarterly dividend of $0.06 a share. While that's only a 1.5% yield, Cisco continues to generate massive amounts of cash, which it can use to grow its dividend.
The Foolish bottom line
Special situations can provide great returns. Consider the three tickers above, along with the 13 names from a new, free report from Motley Fool's expert analysts called "13 High-Yielding Stocks to Buy Today," including one named by a senior retail analyst as "the dividend play of a lifetime." Hundreds of thousands have requested access to this report, and today I invite you to download it at no cost to you. To get instant access to the names of these 13 high yielders, simply click here -- it's free.
The Motley Fool owns shares of El Paso. The Fool has created a bull call spread position on Cisco Systems. Motley Fool newsletter services have recommended buying shares of Cisco Systems and Vodafone Group. 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.