What Does Buckle's Special Dividend Say About The Upcoming Quarter?

| About: The Buckle, (BKE)
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That was good timing. Monday, I predicted the apparel retailer, The Buckle (NYSE:BKE), would announce a large special dividend at its November board meeting.

Buckle didn't let me down. The company just announced a $4.50 special dividend in addition to its usual $0.20 regular dividend to be paid to shareholders of record at the close of business December 7. This special dividend is Buckle's fifth in a row.

This is a whopping one-time dividend. None of its past special dividends comes close in size. Together with its $0.20 regular dividend, Buckle is paying out a 10% dividend. There are two implications:

1. Buckle likely had an unusually good quarter. Consider: Buckle had $197 million in cash and short-term investments on its balance sheet when it last reported in August. That's $4.10 a share. The company is expected to earn another $40 million, or $0.83 a share, for the upcoming quarter. It appears that those estimates are probably too low - otherwise, Buckle wouldn't have the dough for a special dividend this size. The Buckle probably will beat earnings estimates handily when it reports later this month.

2. The Buckle is one of the most heavily shorted stocks - nearly 34% of the float is held short. Expect a large short squeeze, something I suggested in the past, as the shorts rush to become shareholders. I doubt they'll want to pay the $4.70 or stay short in the face of what will likely be a great quarterly report.

This remarkable company continues to reward its loyal shareholders and deserves favorable investor attention.

The Buckle has taken advantage of this year's 15% dividend tax treatment by issuing a very generous special dividend. That leaves only two companies on my original list - Werner Enterprises (NASDAQ:WERN) and Stamps.com (NASDAQ:STMP) - yet to announce special dividends. It's a good bet they, too, will squeeze in a large special dividend before year's end to take advantage of what may be the last favorable dividend tax treatment. Werner and Stamps.com shareholders may be getting November surprises.

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 article.

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