Special Dividends: 90 Days And Counting

by: Stephen Rosenman

Let the countdown begin. December 31 is now a little more than 90 days away. That day all sorts of tax goodies are set to go away. Most prominent: The end of the dividend tax-advantaged 15% rate. Come January 1, dividends will be considered ordinary income and be taxed according to your personal tax bracket.

With that in mind, back at the start of January, I selected seven companies likely to give large special dividends. The list - Armstrong World (NYSE:AWI), Buckle (NYSE:BKE), Limited Brands (LTD), MTOX Scientific (NASDAQ:MTOX), Stamps.com (NASDAQ:STMP), Werner Enterprises (NASDAQ:WERN), and Wynn Resorts (NASDAQ:WYNN). To get on the list, a company had to fill two key criteria: Insiders had to hold a high share percentage and the company had to have given a special dividend in 2010, the last time the dividend tax treatment was scheduled to end.

So far, Armstrong and Limited have handed out special dividends. Armstrong mailed $8.55 a share out, amounting to 18% of share price. Limited gave investors $1.00 in addition to its regular dividend.

Who's Left In The Special Dividend Running:

Sad to say: MTOX got taken out of the running. Lab Corporation of America took them over. Investors shouldn't feel bad: The stock was acquired at a nice premium. If you were a shareholder, MTOX gave you a 92% year to date profit. A nice consolation prize!

That leaves only four companies left in my dwindling list. 90 days till dividend Armageddon.

Stamps.com is a cash-laden company with giant investor holdings and no debt. It's only given one dividend out in 8 years, that being the magical 2010 special dividend year. Time for Stamps.com to revisit that sound strategy again.

Werner is a trucking company. This company loves special dividends. It has given investors one in each of the last 4 years! It's a good bet Werner makes it 5 in a row. Why not take advantage of the 15% rate?

Wynn gives lots of special dividends. In addition to its regular $0.50 dividend, Wynn has given a special dividend for the last six years (except 2008). I'd say it's a reasonable bet Werner gives a special dividend this year (Great odds! Better than their roulette table!)

Last but not least: the Buckle. This apparel retailer has a sterling balance sheet heaped with cash, no debt, easily handled capex, and a history of special dividends. Its given shareholders a special in every one of its last four years. Literally all excess cash goes back to investors.

An Aside

Most websites list dividend yield according to a company's regularly scheduled dividend. Werner, Wynn and the Buckle give special dividends on almost a regular basis. If you don't know that, you miss some really wonderful dividend players.

A Double Aside

If you are a CFO of a dividend contender-challenger-aristocrat and your company has excess cash, why not throw a special dividend party? Pushing some of 2013's dividends into 2012 makes sense.

One Last Aside

The Limited just might surprise with a second dividend bonus. It did that in 2010.

Bottom Line

Ninety days and counting. Four companies left in the prediction. Will they show investors the money this Christmas? Why not? This is the year of the special dividend! Expect to see a generous Stamps.com, Werner, Wynn, and Buckle.

Disclosure: I am long BKE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this

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