Many companies are doling out special dividends before year-end, but others are still sitting on the sidelines. Which companies are the best candidates for paying special dividends before the clock strikes midnight on New Year's Eve?

Later in this article I'll unveil three recent additions to my special dividends wish list. But let's first take a look at why companies are forking over these dividends and which ones are the latest to do so.

Just in the nick of time
Many companies will accelerate fourth-quarter dividends or pay special dividends by year-end, a move that'll save shareholders a potential hit on their 2013 taxes. As it currently stands, taxes on personal income, capital gains, and dividends will increase next year unless Congress extends Bush-era tax cuts and averts the fiscal cliff.

Just this week, PetSmart (UNKNOWN:PETM.DL) revealed it'd accelerate its fourth-quarter dividend payment. PetSmart pays a modest 0.9% dividend, and its 19% dividend payout ratio signals it has room to increase its dividend. However, its balance sheet cash as a percent of market cap is only 4%, and its debt-to-equity ratio is 46%. Also, insiders own less than 2% of outstanding shares, so the motivation for major shareholders to pay a special dividend isn't as strong as it is for a company with very high insider ownership.

But PetSmart has certainly returned a lot of value to shareholders in other ways. Its stock is up an incredible 40% year to date, roughly three times as much as the S&P 500.

TD AMERITRADE (NASDAQ:AMTD) recently announced it'd pay a special dividend before year-end. With its modest dividend payout ratio and 60% insider ownership, it's a great candidate for doing so. Unbelievably, TD also holds roughly 60% of its market cap value in balance sheet cash, so it has plenty of funds to pay its dividend from company cash coffers.

Let's take a look at three more companies I think are well poised to pay a special dividend before the end of the year.

Making a list, checking it twice
I focused on companies that pay dividends, but at modest dividend payout ratios. I also looked for cash-heavy companies with little long-term debt and desirable balance sheets. Here are three companies I'm adding to my special dividend wish list.


Dividend Yield

Dividend Payout Ratio

Cash as Percent of Market Cap

Total Debt to Equity






Charles Schwab (NYSE:SCHW)





Activision Blizzard (NASDAQ: ATVI)





Source: Yahoo! Finance.

These three companies pay modest dividends. They also have dividend payout ratios that allow them to increase dividends down the road, most notably computer-gaming company Activision Blizzard with its 23% payout ratio. The companies each possess sizable cash positions in relation to their respective market caps. This is especially true for Charles Schwab and Activision Blizzard.

Nike boasts little debt and a modest payout ratio that allows the company to increase its dividend in the future. But since insiders own less than 1% of outstanding shares of Nike, major shareholders aren't as motivated to pay a special dividend. Disappointingly, Nike stock has underperformed this year. The company recently announced it would agree to create thousands of new jobs in Oregon if the government agreed not to change corporate tax laws.

Schwab pays the most generous dividend of these three companies, but possesses the most debt. However, the company has tons of balance sheet cash. Also, insiders own 15% of Schwab shares, signaling a possible motivation to pay a special dividend. Despite pressures the company faced in its exchange-traded fund business this year, the stock has returned roughly 17% to shareholders year to date. Schwab has exciting opportunities ahead, including the rollout of lower-cost retirement solutions.

With no long-term debt, leading video-game publisher Activision Blizzard possesses a mighty balance sheet. Due to its low 23% payout ratio, Activision is in a great position to increase its dividend. Even though Activision stock is down 5% year to date, it remains a buy for many investors due to its outstanding margins, increasing revenues, and customer loyalty. Insiders own a whopping 62% of Activision Blizzard shares, so plenty of extra motivation exists for the company to pay a special dividend.

Foolish bottom line
Even though these three companies haven't announced a special dividend, I think they are in a good position to do so. If I had to put my money on one of these companies to pay a special dividend before year-end, I'd go with Schwab. Which companies are on your special dividend wish list and why? Let us know in the comments section below.

Fool contributor Nicole Seghetti has no positions in the stocks mentioned above. The Motley Fool owns shares of Activision Blizzard and Nike. Motley Fool newsletter services recommend TD AMERITRADE Holding, Activision Blizzard, Nike, and PetSmart. 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.