For some investors, dividends act as a small bonus one receives every quarter for being a loyal shareholder, while others use a company’s distributions as a strategy and investment in and of itself; discover one market-beating strategy here. When a company has extra cash on its balance sheet or wishes to distribute its income in a one-time event to shareholders (often times for tax reasons), they will announce special dividends, typically outsized and independent compared to regular quarterly distributions.
Let’s take a look at a few stocks that made similar announcements in May and expect to go ex-dividend in the coming weeks.
CVR Energy
CVR Energy, Inc. (NYSE:CVI) announced on May 28th its intentions—which have now passed—to pay a special dividend amounting to $6.50/share that was payable on June 10, for those shareholders on record as of June 3. The $5.5bn independent fuel refiner and marketer has had a blow-out year so far, up 28%, even after clocking in a gain of over 100% in 2012. CVR Energy, Inc. (NYSE:CVI) continually beats earnings announcement after earnings announcement, including a 25% surprise at the start of May. Billionaire Carl Icahn of Icahn Capital LP expects a payment of $462mm for his ownership in CVR; see his top picks here.
In this case, the time between the announcement of the dividend and the ex-dividend date was very short (most likely to honor existing shareholders). However, there is a consolation prize for those who can’t get into CVR Energy, Inc. (NYSE:CVI) in time for the dividend.
Due to Icahn’s very large stake in CVR Energy, Inc. (NYSE:CVI) (north of 71mm shares, amounting to almost $3.7bn worth), Icahn Enterprises plans to up its annual distribution from $4/share to $5/share, payable in cash or depository units. That policy is slated to take effect in Q3 of this year.
United States Cellular
United States Cellular Corporation (NYSE:USM) joined CVR Energy, Inc. (NYSE:CVI) in announcing a significant special dividend in May; United States Cellular Corporation (NYSE:USM) intends to have a one-time payout of $5.75 per share for shareholders on record as of June 11 (payout will be two weeks later). Like the majority of the stocks on our screen, United States Cellular Corporation (NYSE:USM) falls into the definition of a small-cap, which has a market capitalization between $1bn and $5bn. We take a keen interest in this size range, as we’ve found a small-cap strategy that has beat the market by 18 percentage points a year on average.
The $3.3bn wireless telecom service provider surprised analyst and investors alike by reporting a positive EPS of $0.16 on May 3rd compared to an estimated -$0.14. Billionaire Mario Gabelli of GAMCO Investors keeps 3.7mm shares in his portfolio; read about his other positions here.
Main Street Capital
Main Street Capital Corporation (NYSE:MAIN) declared a special dividend in the middle of May as well, amounting to $0.20/share for those investors on record as of July 18th. Although not as large as the distributions on our list, the dividend nicely compliments Main Street Capital Corporation (NYSE:MAIN)’s existing dividend yield of 6.2%.
The investment firm typically pays out a special dividend once per year, but this semi-annual one marks a new, continuing tradition of twice-a-year payouts. Main Street Capital Corporation (NYSE:MAIN) recently saw its credit line increased with one lender relationship, opening up easier financing for future debt and equity investments. Billionaire Israel Englander of Millennium Management owns slightly less than 50,000 shares; view his top picks here.
Neutral Tandem
Neutral Tandem Inc (NASDAQ:IQNT) not only joins our list as a company releasing a special dividend, but it announced its first-ever quarterly dividend in late May as well. On top of the $0.0625/share quarterly dividend the company plans to pay out (which adds up to a 4.4% forward yield), Neutral Tandem Inc (NASDAQ:IQNT) also has intentions to pay $1.25/share to investors on record as of June 14.
Shareholders should take note, however, as the network solutions provider has a market cap of $190mm and is priced just south of $6; it is also coming off of a rough year, down 56% in the last twelve months. Famed tech investor and billionaire Jim Simons of Renaissance Technologies has 800,000 shares in his portfolio, down from 1.1mm at the end of 2012.
Final thoughts
The four aforementioned stocks—Neutral Tandem Inc (NASDAQ:IQNT), Main Street Capital Corporation (NYSE:MAIN), United States Cellular Corporation (NYSE:USM) and CVR Energy—each offer, or have offered investors a unique special dividend situation. For those who missed out on CVR Energy’s relatively short intermediate period before issuing its own payout, Icahn Enterprises is worth looking at as a type of secondary investment off of this move.
Disclosure: none
