News Analysis date published New: 
Thursday, February 28, 2013 - 11:30
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Tuesday, March 5, 2013 - 15:36
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Thursday, February 28, 2013 - 11:30

Can You Really Get 38 Dividend Payments In One Day?

Thursday, February 28, 2013 11:30 AM

December 2, 2004 was a pretty good day for Steve Ballmer.

On that day, the 48-year-old CEO of Microsoft (Nasdaq: MSFT) received a dividend check worth $1.2 billion.

So did Bill Gates, co-founder and Chairman of Microsoft at the time. On that day he collected more money in dividends than most people could earn in a thousand lifetimes -- nearly $3.4 billion (which he promptly gave to his nonprofit foundation).

If you think these two men received these checks because they were Microsoft executives who owned a lot of company stock, you'd be right... but only partially.

There's another reason they got this massive payday... a reason that could bring you thousands of dollars in 2013.

You see, these two men weren't the only ones who got a massive payday in 2004. Thousands of "regular" investors made $1,000… $10,000… even $50,000 or more at the same time.

The reason is simple: Microsoft paid a "special dividend." As a reward to shareholders, the company issued a one-time dividend payment of $3.00 per share -- 38 times more than its regular quarterly payment at the time.

Ballmer, Gates, and thousands of everyday investors made a fortune overnight.

But here's the thing...

After dishing out such a large one-time dividend, you'd think Microsoft would slow down its payments at that point, right?

Wrong. That big dividend proved to be a sign of more dividends to come. And many more dividend increases...

Since its special dividend, not only has Microsoft never missed a dividend payment... it's increased it every year -- by a total of 187%.

To put that in dollar terms, if you earned $1,000 in annual dividends from Microsoft in 2004 and you continued to hold your shares, then you'd be pulling in $2,870 in annual dividends today.

Keep in mind, over the same time period the dividend growth for the S&P was a measly 31 % -- six times less than Microsoft's dividend growth rate.

In other words, Microsoft investors got to keep their massive payday... and watch their dividend payments soar over the next decade.

But since you can't go back in time, how can you cash in on both special dividends and dividend increases today?

You should start by looking at companies like Microsoft -- firms that dominate their industries... reward their shareholders... and produce a lot of cash.

Having a boatload of cash may be the most important factor. After all, you can't pay out billions if you don't have billions.

Fortunately, companies across America are holding more cash than ever before.

After the market crashed in 2008-09, companies held onto their cash to protect themselves and their shareholders. According to the Federal Reserve, the amount of cash in company coffers has since ballooned to an astonishing $1.7 trillion -- the biggest corporate cash pile in history.

But as I talked about in this article, with that much money sitting in the bank, more companies are starting to pay dividends than at any time in history. Senior S&P Index Analyst Howard Silverblatt recently told The Wall Street Journal that S&P 500 companies paid a record $281.5 billion in dividends in 2012 -- up 17% from 2011 and 14% higher than the previous record set in 2008.

Given how much cash companies are holding, I strongly believe dividend payments will increase across the board over the next several years. And that could mean more special dividends, too.

One little-known company I've been following paid two special dividends in 2011 worth $0.50 per share. It then paid four more $0.50 per-share special dividends in 2012... on top of its $0.60 regular dividend. Best of all, the CEO recently announced that the company plans "to continue to pay both regular and special dividends" going forward.

Another company I've been following, Cisco Systems (Nasdaq: CSCO), started paying a dividend in 2011 and has already increased it 133%. And I expect to see similar dividend increases in the future. After all, it holds almost as much cash as Microsoft -- an incredible $45 billion.

I've got more details on these big dividend payers, along with 11 other stocks paying out enormous dividends at a rapid clip, in my latest research video.

To access it, visit this link.

Paul Tracy owns shares of CSCO.
StreetAuthority LLC owns shares of CSCO in one or more of its “real money” portfolios.