Special dividends: what they are and how they work
A special dividend is a one-time payment that a company makes in addition to, or instead of, its regular dividend. It is usually funded by extra cash from a strong year, an asset sale or a restructuring.
Why companies pay them
- They have more cash than they need and want to return it to shareholders without raising the regular dividend.
- A one-time event, such as selling a business, produced a lump of cash.
- A tax or corporate-structure change makes a payout attractive before a deadline.
How to treat them in your income plan
Special dividends are not expected to repeat, so it is safer not to count them as recurring income. A stock's yield figure that includes a special dividend can look much higher than what it will pay in a normal year.
Dates
A special dividend has its own ex-dividend, record and payment dates. Very large special dividends can follow different ex-date rules, so check the company's announcement for the exact dates.
Frequently asked questions
Will a special dividend be paid again?
Not necessarily. They are one-time by definition, although some companies pay one in many years.
Should I include special dividends in my yield?
Be careful. Including them can overstate the income you can expect in a normal year.
Keep reading
- What is a dividend yield trap?
- How dividend yield works
- Ex-dividend date vs record date vs payment date
General education only, not investment, tax or legal advice. Rules can differ by country and security.