A Special Dividend Payer To Put On Your Radar
As you may know, each month I make a point to screen for stocks that are likely put more cash in your pocket. As Chief Investment Strategist of High-Yield Investing, it’s part of my job.
In each issue of my premium newsletter, I scan the market for potential dividend hikes. Ideally, I’m looking for hikes that could happen over the next four to six weeks. I also highlight noteworthy special distributions on the horizon.
We don’t do this just for fun. In a perfect scenario, we find great ideas for consideration in our premium portfolio… Companies posting outsized double-digit increases, and reliable dividend-payers that have been steadily growing payouts for a decade or more.
I flag these stocks first for my premium readers so that they can research them and get a head start. Then, I share them with the public.
We’ve had a pretty good run of finding solid ideas from this, so it pays to follow along each month. Some of them end up paying off big time.
If you’re looking for a potential addition to your income portfolio, then I can’t think of a better place to start. So without further delay, here’s what I’ve found this month…
Special Dividend Season
December is the busiest time of year for special dividends, as many companies like to reward stockholders with supplemental year-end distributions.
Think of it as a Christmas bonus.
Buckle Inc. (NYSE: BKE) is one of those companies with a pattern of giving investors a little something extra. Last year, it handed out a special distribution of $1.25 per share. Given the craziness of 2020, you could forgive the apparel retailer for skipping out this year. But once again, shareholders are in store for a sizeable bonus.
Management has just approved a special dividend of $2.00 per share, payable on December 29 to shareholders of record at the closing bell on December 21. This is in addition to the firm’s regular quarterly payment of $0.30 per share.
Known for its denim fashions and trendy footwear, Buckle operates a chain of 446 outlets across the country. Year-to-date sales are running about 7% behind last year’s pace – not surprising considering the forced closure of all physical stores back in March.
But business has been fully restored. In fact, third-quarter revenues climbed 12% to $251 million – driven by a 72% surge in the online channel. Digital e-commerce sales now account for about 20% of the total. Earnings are back on track as well, bouncing 60% to $0.85 per share.
Unfortunately, the ex-dividend date to capture this upcoming special dividend has passed. But I still wanted to bring this to your attention anyway. If for no other reason, to put it on your radar for next time.
Meanwhile, the stock will likely drop by a couple of dollars early next week to reflect the special distribution. And that dip might provide a good entry point (with no tax liability). Even without the supplemental payment, the base dividend was upped 25% last year, lifting the current yield to 3.7%.
That’s nearly double the market average, with a sustainable payout ratio below 50%.
Moreover, the merchandise has been catching on in both the men’s and women’s categories. Buckle has now logged six straight months of rising sales, capped by an 8% increase in November. And the website continues to attract traffic. The stock is trading at just 8 times cash flows, in line with its historical average.
Action to Take
For those who are interested, I would consider BKE a portfolio candidate on a pullback into the mid-$20s.
Remember, just because I highlight stocks that are likely to increase dividends doesn’t necessarily make them “buys.” These are merely ideas to get you started in the hunt for high yields.
All of these stocks are worthy candidates for more research as a potential addition your portfolio. But if you want to know about my absolute favorite high-yield picks, then you’ll need to be a member of High-Yield Investing.