10 High-Performance Stocks to Buy for Their Special Dividends

dividend stocks - 10 High-Performance Stocks to Buy for Their Special Dividends

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From time to time, I like to revisit columns I’ve written in the distant past. Back in May 2016, I wrote about four dividend stocks that were extra-special because they paid special dividends. 

If you’re a dividend investor, you probably feel the special dividend is like if you won a big jackpot at a casino slot machine. The income is totally unexpected, but appreciated nonetheless. Here’s what I had to say about special dividends in the past:

“In my opinion, special dividends are one of the best examples of efficient capital allocation because it shows me that management understands the ebb and flow of its own cash flows and is more than willing to reward shareholders when the coffers are flush and to hold back when they’re not.”

The four stocks I wrote about in 2016 were Amerco (NASDAQ:UHAL), Diamond Hill Investment (NASDAQ:DHIL), Under Armour (NYSE:UA) and Meta Platforms (NASDAQ:FB). Amerco and Meta Platforms have done well, Diamond Hill has done okay and Under Armour has been a bust. I’ll take those averages.

Anyway, in an ode to the past, I’m now recommending 10 more high-performance stocks that paid out a special dividend in 2021. Long-term, I’m confident the returns will be there for these names: 

  • Buckle (NYSE:BKE)
  • Brown-Forman (NYSE:BF-A, NYSE:BF-B)
  • Compass Diversified (NYSE:CODI)
  • Dick’s Sporting Goods (NYSE:DKS)
  • Dillard’s (NYSE:DDS)
  • EOG Resources (NYSE:EOG)
  • National Beverage (NASDAQ:FIZZ)
  • Red Rock Resorts (NASDAQ:RRR)
  • Ethan Allen Interiors (NYSE:ETD)
  • RMR Group (NASDAQ:RMR)

Dividend Stocks to Buy: Buckle (BKE)

A The Buckle (BKE) store open for business
Source: damann / Shutterstock.com

Special dividend(s) paid: $5.65 a share

First up on this list of dividend stocks is Buckle. This Nebraska-based casual apparel retailer for both women and men is a champion when it comes to special dividends. Over the past five years, the company has paid $12.40 in special dividends, including two in 2020. 

With the December 2021 payment, Buckle now pays a quarterly dividend of 35 cents, up 6% from 33 cents. Its annual payment of $1.40 yields a reasonable 3.67%.

This retailer reported its December sales on Jan. 6. The company’s same-store sales rose 17.7% year-over-year (YOY). Its net sales were also $198.7 million, 17.3% higher than a year earlier. Heading into the final month of its fiscal year, Buckle had cumulative net sales of $1.23 billion. That was 46.7% higher than in 2020. 

According to Morningstar, Buckle has trailing 12-month (TTM) free cash flow (FCF) of $310 million. That’s an FCF margin of 25.2% and an FCF yield of around 17%. 

BKE stock is a straight-up, long-term buy. 

Brown-Forman (BF-A)

a row of glass alcohol bottles to represent sin stocks
Source: Shutterstock

Special dividend(s) paid: $1.00 a share

In November 2021, this maker of Jack Daniel’s, Woodford Reserve, Old Forester and other whiskeys announced a $1 per share special dividend for both its Class A and Class B shares. This is the second special dividend paid out in the past five years; the company also paid out $1 per share in 2018.

As part of the November announcement, Brown-Forman also raised its quarterly payment by 5% to $0.1885 per share. The annual payment of 75 cents yields a decent 1.07%. What’s more, this company has increased its annual dividend for 38 consecutive years, making it a Dividend Aristocrat. It has paid quarterly dividends for 78 years now. 

Over the past 10 years, the company has delivered annual total shareholder returns (TSR) of 17%. However, one thing I especially love about Brown-Forman is that it has been family-controlled since 1870, when George Garvin Brown founded the company. The business has stayed in the family ever since. 

Unless people stop drinking, BF-A stock represents a wonderful business to own.

Dividend Stocks to Buy: Compass Diversified (CODI)

The logo for 5.11, a holding of private equity company Compass Diversified Holdings, is seen on the side of a building.
Source: Karolis Kavolelis / Shutterstock.com

Special dividend(s) paid: $0.88 a share

It’s quite possible that Compass Diversified may never pay another special dividend in the future. That’s because its September 2021 payment of 88 cents was made to offset the shareholders’ tax liability from its conversion to a corporation from a trust. 

This private equity firm was founded in 1998. Compass Diversified buys companies valued between $200 million and $800 million. It looks to add one to two platform businesses each year, then makes two to three bolt-on acquisitions each year for each of its platform companies (Page 15).

In 2011, CODI had adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $133 million. Its goal is to hit $1 billion by 2028. The company is currently at $385 million.

Back in August 2021, Barron’s published an article that suggested Compass Diversified’s transformation into a C-Corp should reduce its cost of capital while increasing the base of shareholders that can own CODI stock. As part of its transformation, it has reduced its quarterly dividend to 25 cents.  

I totally agree with Barron’s. This was the right move to make. What investors give up in income, they’ll more than makeup in capital appreciation with this pick of the dividend stocks. 

Dick’s Sporting Goods (DKS)

An image of a Dick's Sporting Goods retail location
Source: Jonathan Weiss / Shutterstock.com

Special dividend(s) paid: $5.50 a share

Next up on this list of dividend stocks is DKS stock. This sporting goods retailer had a busy third quarter in 2021. 

Not only did Dick’s pay out a special dividend of $5.50 a share, it also increased its quarterly payment by 21% to $0.4375. Its annual payment of $1.75 yields a reasonable 1.42%. On top of this, the company also repurchased $273.4 million of its stock during Q3.  

Dick’s Sporting Goods has a 7% share of the U.S. sporting goods retail market (Page 9). The company continues to grow its market share through its omnichannel retail platform. Some of its initiatives launched in 2021 include House of Sport — an experiential retail store — and Public Lands, the company’s “outdoor omni-channel retail concept” (Page 19). 

A total of 27 analysts cover DKS stock on MarketWatch. Their average rating is Overweight with a median target price of $153. That’s much higher than where this pick of the dividend stocks currently trades. DKS changes hands at around $109 today.

According to Morningstar, Dick’s TTM FCF is $1.34 billion. It has an FCF margin of 11.1% and an FCF yield of around 14%. That makes it a value buy despite generating a return of roughly 52% over the past one year. 

Dividend Stocks to Buy: Dillard’s (DDS)

A photo of the exterior of a Dillard's (DDS) store with the company logo above the entrance.
Source: JHVEPhoto/ShutterStock.com

Special dividend(s) paid: $15.00 a share

Next up on this list of dividend stocks is DDS stock. This Arkansas-based operator of department stores has more than 280 store locations located across 29 states. It also operates 32 clearance centers and an online business through Dillards.com. 

This company is controlled by the Dillard family, which holds 99.7% of the Class B shares. That allows the family to nominate 10 of the 15 directors for the company (the Class A shares are able to vote for five directors). In addition, employees through the company’s 401(k) plan own 40.9% of the Class A shares. The company’s Nov. 18 press release noted the following about its special dividend:

“We are extremely happy with the Board’s decision to grant this dividend, which is a special thanks to our shareholders – including our own associates and their families who own approximately 70% of our outstanding shares. They stuck with us through unprecedented times and have been instrumental in achieving our remarkable success this year.”

Special dividends are a great way to keep family and employee-controlled businesses from losing engagement with their shareholders. What’s more, Dillard’s owns the majority of its 48 million square feet of real estate. All told, DDS is a promising pick.

EOG Resources (EOG)

Black oil barrel that reads "oil" on the side in a pool of oil with other barrels
Source: Shutterstock

Special dividend(s) paid: $3.00 a share

EOG Resources is the next pick on this list of dividend stocks. The oil and gas producer — which has considerable acreage in the Permian Basin, Eagle Shale and Bakken shale plays — paid two special dividends in 2021. In July it paid out $1 a share, then another $2 a share in December. 

EOG did not just pay two special dividends, however — it also raised the quarterly dividend in November by 82% to 75 cents a share. The $3 annual payment yields a reasonable 1.78%.

How do you know the oil and gas industry is booming? This company’s TTM FCF through Q3 2021 was $3.07 billion. That’s up from $1.54 billion at the end of 2020. EOG’s current FCF margin and FCF yield are 18.4% and 4.6%, respectively. I consider an FCF yield between 4% and 8% to be growth at a reasonable price. 

Thanks to the big turnaround in oil and gas, EOG stock has generated a year-to-date (YTD) return of 28% so far. For the past one year, it has a total return of 103%.

Dividend Stocks to Buy: National Beverage (FIZZ)

la croix branded drinks in a store
Source: Jer123 / Shutterstock.com

Special dividend(s) paid: $3.00 a share

I really like how the maker of LaCroix sparkling water allocates capital. Rather than pay a quarterly dividend (which can become a burden around a company’s neck), National Beverage pays out a special dividend when it’s flush with cash.

Over the past five years, this pick of the dividend stocks has paid out $8.20 a share in special dividends. The company didn’t pay a dividend in 2019, so its average annual payout is an impressive $2.05 a share.

While this company’s shares went through a bit of lull in 2020, they’ve gained back most of the losses. Now, FIZZ trades at about double where it was nearly two years ago. 

In National Beverage’s December 2021 press release for its Q2 2022 results, the company pointed out that, 17 years ago, it had a market capitalization of $315 million with $125 million in equity. Since then, it has paid out more than $1.2 billion in dividends. That’s almost 4 times its 2004 market cap and 10 times its 2004 equity. 

National Beverage’s profitability needs to improve a little, but other than that FIZZ stock is doing just fine.

Red Rock Resorts (RRR)

a woman smiling while using a slot machine in a casino. representing gambling stocks
Source: Maridav/Shutterstock, Inc.

Special dividend(s) paid: $3.00 a share 

Back in November, this owner and operator of casino and entertainment properties made a tender offer for $350 million of RRR stock at prices between $46 and $53 per share. At the same time, Red Rock Resorts also announced a $3 a share special dividend, which was ultimately paid on Dec. 22, 2021. 

In fiscal 2021, Red Rock grew revenue 37% to $1.6 billion, up from $1.2 billion in 2020. What’s more, the company’s adjusted EBITDA increased 101% to $741 million from $368.5 million a year earlier. In fact, revenues were up YOY over all of its revenue streams.

Currently trading at around the $45 mark, the median target price of the nine analysts covering this stock is $56. Analysts expect it to earn $2.24 per share in 2022.  

Over the past one year, RRR stock generated a total return of 85%. Down by nearly 18% YTD, now might be an excellent time to buy this pick of the dividend stocks.

Dividend Stocks to Buy: Ethan Allen Interiors (ETD)

Ethan Allen store exterior and logo
Source: Helen89 / Shutterstock.com

Special dividend(s) paid: $1.50 a share

Ethan Allen is the next entry on this list of dividend stocks. The furniture retailer paid two 75-cent special dividends in 2021 — one in May and another in August. The company also raised the regular quarterly payment by 16% with the January 2022 payment. It now pays 29 cents per quarter. Its annual payment of $1.16 yields a healthy 4.13%.

If you want to make money on this company, buy some now and then put aside some cash for the future. Since 2009, it has traded below $20 on a few occasions. When another one comes along, back up the truck. 

Like many retailers that depend on in-store visits, Ethan Allen got hit by the pandemic. In fiscal 2019 (June year-end), it had annual sales of $747 million. In the TTM ended December 2021, sales came to $746 million.  

This company’s enterprise value of $597 million is 5.28 times EBITDA, considerably less than its five-year average of 9.9 times. ETD stock is in value territory at the moment.

RMR Group (RMR)

tiny house figures atop letter blocks spelling out REIT, representing reits to buy. stock predictions
Source: Shutterstock

Special dividend(s) paid: $7.00 a share 

RMR Group is the last entry on this list. Including its $7 special dividend, this alternative asset manager of five real estate investment trusts (REITs), several real estate operating companies and $32.7 billion in assets under management (AUM) paid out $8.52 in total dividends in 2021. Based on its current share price, that’s a 27% yield. 

In the first quarter ended Dec. 31, 2021, this company’s management and advisory services revenue came to $46 million, roughly 11% higher YOY. What’s more, RMR Group’s adjusted net income rose 10% to $7.6 million. 

Like other businesses on this list of dividend stocks, RMR Group is a controlled company. CEO Adam Portnoy owns 51.4% of RMR Group LLC, the operating business of the publicly traded holding company. Portnoy also controls 91.3% of RMR Group’s voting shares.

This company continues to grow its private capital assets under management. This will lead to higher AUM, which translates into higher fees. What’s not to like when it comes to RMR stock?

On the date of publication, Will Ashworth did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.


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