These Stocks Could Deliver Special Dividend Checks

If you could have some extra checks deposited into your bank account, would you do it? Of course you would. That’s what investors of special dividend stocks can look forward to. In today’s market, dividends may not play as big of a role as they did before, but there are a number of companies—including some of the best dividend stocks—that have the ability to reward investors with special payouts. In this article, we are going to take a look at five special dividend stocks for 2017.

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Special Dividend
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Ford Motor Company

Investors may still have bad memories about the U.S. auto industry. However, the cyclical nature of the industry is actually one of the reasons why some companies may be able to pay special dividends.

I believe Ford Motor Company (NYSE:F) is one such company. Headquartered in Dearborn, Michigan, Ford is the best-selling vehicle brand in the U.S. and one of the largest automakers in the world. Last year, the company sold over 2.6-million vehicles in the U.S., marking its best annual sales results in a decade.

As I mentioned earlier, the automotive industry is a cyclical one. When the economy is booming—like what’s been happening in the past several years—vehicle sales are doing great. But once a downturn hits, consumers probably won’t be buying as many new cars as before, and automakers could see their business decline.

Ford stock already pays quite handsome dividends with a 5.35% dividend yield. But because of the cyclical nature of the industry, it may not want to raise its payout to a level that’s unsustainable in the long term. What’s the solution? Special dividends.

In March 2016, Ford paid a supplemental cash dividend of $0.25 per share on top of its quarterly dividend. This March, the company paid another special dividend of $0.05 per share. In total, $1.2 billion of special dividends have been paid in addition to Ford’s regular dividends in the past two years.

Microsoft Corporation

By now, many investors have realized how solid Microsoft Corporation (NASDAQ:MSFT) is. Even though it is a four-decade-old company and has made some not-so-successful moves in the past (such as acquiring Nokia’s mobile business), Microsoft still dominates a very important market in the tech world: operating systems.

Microsoft managed to establish its presence relatively early. And as the personal computer market started to grow, so did the company’s business. Today, Microsoft is the most dominating player in the desktop operating system marketplace with a whopping 90.2% market share. The company is also a leading provider of productivity software and has established a huge presence in the booming cloud computing industry.

In recent years, Microsoft has put a lot of effort into increasing its shareholder returns. The company’s quarterly dividend rate, which is at $0.39 per share right now, has increased 290% over the past 10 years.

While regular dividends and share buybacks are the most common ways of returning value to shareholders, note that back in 2004, Microsoft did pay a special dividend of $3.00 per share, representing a one-time cash return of $32.0 billion to MSFT stock investors.

With a booming business and a huge pile of cash, the Redmond, Washington-based tech giant might consider this option again.

JPMorgan Chase & Co.

Banking is far from the most exciting business, but it is a business with high barriers to entry. And for one of the major banks in the U.S., higher than expected profits could result in special dividends.

The company in question is JPMorgan Chase & Co. (NYSE:JPM), whose history can be tracked all the way back to 1799. Today, it is the largest bank in the U.S., with $2.5 trillion in assets. The company provides investment banking, consumer banking, commercial banking, financial transaction processing, and asset management services to clients in more than 100 countries around the world.

Banking is known to be a slow-changing industry, so why is JPM stock a candidate for special dividends?

Well, that’s because the company’s Chief Executive Officer, Jamie Dimon, said that if the stock rises to a level that’s expensive compared to its intrinsic value, he would prefer paying out capital directly to investors than buying back its shares. In the past 12 months, JPM stock has surged 38.4%.

Costco Wholesale Corporation

In the retail business, Costco Wholesale Corporation (NASDAQ:COST) stands out as it is the largest membership-only warehouse club in the U.S. The company operates 732 warehouse stores located in nine countries. Around the world, there are a total of 88.9-million cardholders representing 48.6-million households.

The retail business is facing strong headwinds due to the booming e-commerce industry, but Costco is doing more than fine. The company has as membership renewal rate of 90% in the U.S. and Canada, its two biggest markets. And in the most recent quarter, net sales grew eight percent year-over-year to $28.2 billion.

While Costco’s 1.2% dividend yield may not be something to brag about, the company has been rewarding investors with special dividends. Costco paid a $7.00-per-share special cash dividend in December 2012, a $5.00-per-share special dividend in February 2015, and another $7.00 special dividend just last month.

Apple Inc.

At the end of the day, dividends are paid in cash. So for a company to be a potential special dividend stock, it better have a decent pile of cash. And when it comes to hoarding cash, few companies in this world can match Apple Inc. (NASDAQ:AAPL).

Apple had $256.8 billion in its cash stockpile by the end of the most recent quarter. To give you some perspective, that’s more than the cash that Microsoft, Alphabet Inc (NASDAQ:GOOG), and Amazon.com, Inc. (NASDAQ:AMZN) have combined.

The "iPhone" maker keeps most of its cash overseas for tax purposes. But if President Trump can get his proposed onetime lower tax rate on repatriation past congress, multinational companies like Apple would have more incentive to bring their cash back. And when that happens, part of that cash could be paid out to investors in the form of special dividends.

About the Author:

This guest post was written by Jing Pan, security analyst for Income Investors. He advocates for commonsense, buy-and-hold investing. You can find his daily investment ideas and commentary at IncomeInvestors.com.