Special Dividend Alert! 2 Stocks Primed for Big Payouts

Dividends are already a delectable treat for investors, but special dividends are the cherry on the cake. Companies that offer special dividends distribute significantly higher amounts of money annually than expected.

These unique distributions of company assets can significantly boost investors' returns.

A special dividend is a one-time payment made by a company to its shareholders.

Unlike regular dividends, these payouts are usually larger and tied to specific events such as asset sales, corporate restructuring, spinoffs, or other income-generating activities.

While uncommon, they can be a lucrative opportunity for investors to grab a sweet chunk of cash.

Here are three stocks for your special dividends watchlist.

#1 Infosys

Leading the list is Infosys.

Infosys, on 18 April 2024, announced a special dividend of Rs 8 per share in addition to a final dividend of Rs 20 per share for the financial year 2023-24.

With this, Infosys has declared a total dividend of Rs 46 for the year. This included an interim dividend of Rs 18 per share that it announced after its second-quarter results.

The company has fixed 31 May as the record date for the same.

This move echoes the company's past practices, as Infosys, the second-largest IT firm, had disbursed a total dividend of Rs 34 per share (Rs 16.5 interim, Rs 17.5 final) amounting to Rs 68.4 billion (bn) in FY23.

Furthermore, this isn't the first time the company has distributed special dividends.

It previously issued two special dividends in 2018 and 2019, amounting to Rs 10 and Rs 4, respectively.

Over the years, Infosys has maintained a reputation as a reliable dividend payer, having declared 51 dividends since 2000.

The average dividend payout ratio for five years stands at 58.6%. The dividend yield over the past five years has averaged 2.4%.

Delving into the company's financial strategy, the Infosys board, in its 18 April 2024 meeting, reviewed and approved the capital allocation policy for the next five years, spanning FY25 to FY29.

Notably, the company plans to sustain its practice of returning approximately 85% of free cash flow cumulatively over the said period.

This will be achieved through a blend of semi-annual dividends, share buybacks, and special dividends, subject to regulatory requirements and approvals.

Infosys is a largecap Indian IT services company offering a range of digital and traditional IT services.

From humble beginnings in 1981, the company now counts itself among the largest and most respected global software firms. It's known for its quality management, work ethic, and corporate governance standards.

Infosys Dividend History (2020-24)

	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24
Dividend per share (Adj.) (Rs)	17.9	27.6	31.3	33.9	45.9
Dividend payout ratio (%)	44.6	59	58.7	58.3	72.6
Dividend Yield (%)	2.7	2.0	1.6	2.4	3.1

*Adjusted for bonus issues and stock splits
Source: Equitymaster

For more details, have a look at the Infosys company factsheet and quarterly results.

#2 Standard Capital Markets

Second on the list is Standard Capital Markets.

The board of directors of Standard Capital Markets will meet on 30 April to consider the proposal for the declaration of a special dividend for the financial year 2023-24.

The board, as per the exchange filing, will also fix the record date during the meeting if it approves the special dividend.

This special dividend symbolises the company's appreciation for the steadfast support and trust of its shareholders.

Notably, this marks the first instance in the company's history of distributing dividends, breaking a trend that persisted since 2000.

Moreover, the board will also contemplate the issuance of various instruments, including equity shares and convertible securities.

Furthermore, it's worth noting that in 2023, the company underwent a significant restructuring, including a face value split of its shares from Rs 10 to Rs 1.

Subsequently, it also approved bonus issues in a 2:1 ratio, showcasing a strategic manoeuvre to enhance shareholder value.

Standard Capital Markets specialises in non-banking financial activities, offering value-added services and products to its clientele.

As the company navigates these pivotal decisions, it underscores its commitment to delivering value and fostering investor confidence in its operations.

For more details, see the Standard Capital company fact sheet and quarterly results.

#3 Aster DM Healthcare

Third on the list is Aster DM Healthcare

Aster DM Healthcare, on 12 April 2024, approved a special dividend of Rs 118 per share.

This dividend was attributed to the proceeds from the sale of the GCC business and the redemption of redeemable preference shares issued to the company by Affinity Holdings Pvt Ltd, a wholly-owned material subsidiary of Aster DM Healthcare.

The record date for the said dividend was set as 23 April 2024.

While the board opted against declaring an interim dividend for the financial year 2023-24, the possibility of a final dividend remains on the table, pending approval of audited financial statements for FY24.

This milestone marks the company's inaugural dividend payout since its listing in 2018, signalling a significant shift in its financial strategy.

The company is currently trading a dividend yield of 32.9%.

Looking ahead, with the separation of its Indian entity from its GCC counterpart, Aster DM Healthcare has ambitious expansion plans.

By FY27, the company aims to add 1,700 beds organically, with further growth prospects through inorganic expansion routes.

Aster DM Healthcare operates in multiple segments of the healthcare industry, including hospitals, clinics, and retail pharmacies.

The company operates hospitals, clinics, pharmacies, diagnostic centres, educational institutions, and more.

For more details, see the Aster Dm Healthcare company fact sheet and quarterly results.

To conclude

Investing in stocks that pay special dividends can be appealing for several reasons.

Special dividends provide an additional source of income for investors. If a company has a history of paying special dividends, it can be a way to boost overall dividend income.

They are often a sign of financial strength and profitability, as companies typically distribute special dividends when experiencing excess cash or extraordinary profits.

From a tax perspective, these payouts may offer advantages depending on the investor's jurisdiction, potentially resulting in lower tax rates or different treatment.

Furthermore, positive news about a special dividend can lead to an increase in the stock price, reflecting investor confidence in the company's management.

However, it's crucial to consider the potential risks associated with investing in stocks with special dividends.

Special dividends may not be sustainable, and companies might struggle to maintain such payouts in the long term.

Additionally, stocks with special dividends may experience increased volatility around the ex-dividend date, impacting short-term price movements.

Thus, it's essential to conduct thorough research, assess the financial health of the company, and diversify your investment.

If you want to dig deeper, use Equitymaster's stock screener to check high dividend yield stocks and the best dividend stocks to buy.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...