Special dividend
From Wikipedia, the free encyclopedia
A special dividend is a payment made by a company to its shareholders, that the company declares to be separate from the typical recurring dividend cycle, if any, for the company.
This article may be too technical for most readers to understand. (March 2022) |
Usually when a company raises the amount of its normal dividend, the investor expectation is that this marks a sustained increase. In the case of a special dividend, however, the company is signalling that this is a one-off payment. Therefore, special dividends do not markedly affect valuation or yield calculations, unless the amount is large—in which case they do markedly affect valuation as they are a direct and large depletion of the assets of the company. Typically, special dividends are distributed if a company has exceptionally strong earnings that it wishes to distribute to shareholders, or if it is making changes to its financial structure, such as debt ratio.
A prominent example of a special dividend was the $3 dividend announced by Microsoft in 2004, to partially relieve its balance sheet of a large cash balance.[1] A more recent example of a special dividend is the $1 dividend announced by SAIC (U.S. company) in 2013, just prior to it splitting off its solutions business into a new company named Leidos.[2] Subsequently, in 2020 NortonLifeLock Inc (NASDAQ: NLOK) paid a $12/share special dividend as part of its goal to return the after-tax proceeds from the sale of its Enterprise Security assets to Broadcom.[3]