Special Dividend

Old sitcoms used to have "very special episodes." Mallory got offered drugs at a party. Jessie got hooked on diet pills. Carol's boyfriend died in a car accident. But don't worry...everything was fixed by the following week. Well, maybe not Carol's' boyfriend.

Special dividends work a little like that. Exciting, one-off events that don't really impact the general course of events.

A regular dividend involves cash being paid to shareholders, usually on a quarterly basis. It's a way of distributing company profits to shareholders. So...a company might declare a regular dividend of $1.50 a share. If you own 1,000 shares of the stock, you'll get a check for $1,500.

The key is that this dividend takes place every quarter. The company has to declare it, and can change the amount or suspend it if the management chooses. But, generally speaking, these normal dividends get distributed on a regular basis.

Special dividends are, well...special. They don't repeat quarter after quarter. They often get declared when the company gets a surprise windfall of cash, or if the company has hoarded a large amount of cash and shareholders demand it get spread around.

A company declares a special dividend of $5 a share. Your 1,000 shares now entitle you to a check for $5,000. But that's the only check you'll get from this dividend. It's special...one-time. You might still get your regular dividend next quarter. But the special dividend only comes around once in a while.