Nowadays, income-hungry investors simply can't get enough of dividend stocks. But while some stocks are famous for their high dividend yields, others lurk beneath the radar of many investors -- yet their shareholders enjoy the same great income that more popular dividend stocks sport.
In search of hidden dividends
Most dividend stocks pride themselves on having predictable, dependable payouts. Quarter after quarter, they'll pay the same amount in regular dividends -- with the occasional increase to spice up investor interest. Whenever you look up the dividend yield on these stocks, you'll see a number that reflects the full value of everything the stock paid to its shareholders.
But sometimes, a company will have enough money to make a special one-time payout. For instance, Microsoft (Nasdaq: MSFT) made a $3-per-share dividend payment back in 2004 to appease shareholders who were upset with the company's huge cash stash on its balance sheet.
Dealing up a special -- every time
Even rarer are companies that have made a habit of paying special dividends. They don't want to lock themselves into the pattern of making a particular dividend payment only to have to cut it later. So rather than characterizing their payouts solely as regular dividends, they make a relatively modest distribution to shareholders that they call a regular dividend, but then add a special dividend on top of that amount. And they'll keep doing it, time and time again.
Now here's the tricky part: Because these special dividends are by definition not something that shareholders are supposed to count on happening in the future, some financial data services don't include the dividends in their calculations of dividend yield. As a result, these stocks can go unnoticed by huge numbers of investors -- even though their true yields are often much higher than what gets reported.
Where do I sign up?
Finding these stocks takes some digging, but when you find them, the difference in reported and actual yields can be mind-blowing. Over the years, several stocks have made significant special dividend payouts.
For instance, PDL BioPharma (Nasdaq: PDLI) regularly made special dividend payments between 2008 and 2010. But in 2011, it converted to a pure regular dividend program -- which also had the effect of cutting its annual payout by 40%. Similarly, Federated Investors (NYSE: FII) made special dividend payments of around 6% of its share price in 2010 and more than 8% back in 2008. But the company hasn't seen fit to supplement its smaller regular dividend thus far in 2011.
That leaves only a select set of stocks that continue to use special dividends as big payout producers. Here are the three stocks I found that have distributed the bulk of their payouts via special dividends for at least two years running, including this year:
|
Stock |
Reported Regular Dividend Yield |
Yield Including Special Dividends |
|---|---|---|
|
Diamond Offshore (NYSE: DO) |
0.8% |
5.6% |
|
VeriSign (Nasdaq: VRSN) |
0% |
9.3% |
|
National Presto Industries (NYSE: NPK) |
1.1% |
8.6% |
Source: Yahoo! Finance.
In addition, China Digital TV (NYSE: STV) has announced a series of special dividend payments, including a $0.56 per share dividend declared in June and two $1 installments declared in November 2010.
You could argue that especially in the case of Diamond Offshore and National Presto, these dividends aren't really "special," since they happen so regularly that investors who are in the know assuredly count on them recurring into the future. But the stocks are easy to miss with conventional screening tools.
Get what you deserve
So, in your search for dividend stocks, don't ignore the impact of special dividends. While some of them truly are one-time events, others look more like regular payouts in disguise -- and the yields you can earn from them can be truly extraordinary.
Sometimes, you don't need special dividends to get the yields you want. These 13 high-yielding dividend payers give you the income you want, so check them out today!
