Special Dividend
Quick definition: A special dividend is a one-time extra payment to shareholders, separate from a company's regular dividend.
In plain English
Sometimes a company has more cash than it needs, for example after selling a business or a very strong year, and pays some of it out as a special dividend. Unlike a regular dividend, it is not expected to repeat.
Example
A company pays its usual $0.80 quarterly dividend and also announces a one-time $5 special dividend. A holder of 100 shares receives an extra $500 once.
Why it matters
Special dividends can be large, but they should not be counted as regular income. Like regular dividends, the share price usually drops by about the amount paid on the ex-dividend date.
Common mistakes
- Including a special dividend when calculating a stock’s yield.
- Assuming one special dividend means another will follow.
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