Of course, it’s a special dividend. Why? The end of the year is generally when such payouts occur because companies want to pay out extra cash. Even by those standards though, this year is seeing a lot of activity. It’s hard to think that Obama is not part of the reason why.
When Costco announced its dividend, the stock jumped with investors showing how they approved the move.
Time For Me To Buy Costco?
I personally have exactly the same opinion about Costco as I did. Why? My USDP portfolio is built on long term, sustainable dividend growth. While getting a $7 payout would be nice, the stock’s value will decline by that much (all else being equal). I don’t think that Costco paying this much makes it any more likely to pay out more in the future. In fact, it might be the opposite.
Here Is When I WOULD Care About Special Dividends
I would not buy a stock simply because it has announced a special dividend. That being said, if a company that I currently hold (especially in the USDP), then that is obviously good news as it will make it possible for me to increase my positions by reinvesting that dividend. That being said, I would still want to make sure that it does not change their longer term dividend policy.
Research Might Differ With Me
Credit Suisse research seems to indicate that while such stocks gain 1% on average when they announce the dividend, they also tend to outperform in the following month (by 1.2% on average). That certainly makes me curious. One explanation could be that companies would not go for this if they didn’t believe their underlying business was very strong.
Who Has Announced A Special Dividend?
There are already several including some names held in the USDP:
-Murphy Oil Corp (NYSE:MUR) $2.50
-Carnival Corp (NYSE:CCL) $0.50
-Franklin Resources (NYSE:BEN) $3.00
Many Others Could Potentially Join That Group
-Dell Inc (DELL)