What is a special dividend?
When a company makes a one-off payment to shareholders outside of the standard dividend cycle, it is known as a special dividend. They’re normally paid in cash, are greater than the regular dividend payment, and are a result of exceptional performance and profits in a given period.
Where have you heard about a special dividend?
Your broker will advise you when a company that you hold shares in pays a special dividend. Some investors specifically target companies with a track record of paying special dividends and/or raising regular dividends on a yearly basis. Standard & Poors have a ‘Dividend Aristocrats’ Index that tracks these firms.
What you need to know about a special dividend…
As an investor in stocks, dividends are an important consideration when constructing your portfolio. Special dividends can give your portfolio’s overall performance a significant boost, and a company with a record of paying them regularly can be seen to be particularly focused on long-term performance. Indeed, special dividends are sometimes paid strategically by companies to signal to both investors and competitors that it is on a sound footing. Investors can easily gain exposure to U.S. high dividend yielding firms via the ProShares S&P 500 Aristocrats ETF, which tracks the S&P 500 Dividend Aristocrats Index.