- When a company makes a non-recurring distribution to its shareholders in the form of cash, it is known as a special dividend.
- Special dividends are bigger in quantum than normal dividends and usually follows specific events in the company’s calendar.
- Next, Tesco and B&M European Value Retail are among many to announce a special dividend recently.
When a company makes a non-recurring distribution to its shareholders in the form of cash, it is known as a special dividend. Generally, special dividends are bigger in quantum than the normal dividends that a company pays. It usually follows specific events in the company’s calendar, like a windfall gain or asset sale. Special dividends are known as extra dividends as well.
Special dividends could also be paid when the company wants to spin off a subsidiary firm to shareholders or alter its financial structure. Hover, special dividends are generally not paid by companies more than once in their history.
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For investors, special dividends come as a boon. However, they are not good news for the company as the payout is followed by a fall in share price, as well as a perception that a company may not have enough growth potential.
Here are 5 FTSE 100 companies that have announced special dividend payouts:
Next Plc (LON: NXT)
The clothing and footwear company would be paying a special dividend of 110p each share to shareholders on 3 September. The total outlay for special dividend is £140 million. The company is expected to generate £240 million in cash surplus, which would be distributed to shareholders through special dividends.
The balance of surplus cash could be paid as a second special dividend in January next year and, if paid, would be announced through the company’s Christmas trading statement on 6 January.
The stocks of the company were trading at GBX 8,108.00, up by 0.20 per cent on 26 July 2021 at 12:32 PM.
Tesco Plc (LON: TSCO)
The grocery and general merchandise company in February approved a special dividend payout worth £5 billion after the disposal of its Asian operations last year. The special dividend would be 50.93 pence for each share, amounting to a little over 21 per cent of the company’s market capitalisation.
In December, its operations in Malaysia and Thailand were sold for $10.6 billion to Dhanin Chearavanont’s CP Group.
For the first quarter of 2021, the company’s UK sales were up 0.5 per cent to £10,016 million. Group retail sales were up one per cent to £13,362 million.
The stocks of the company were trading at GBX 232.45, down by 0.79 per cent on 26 July 2021 at 12:34 PM.
B&M European Value Retail (LON: BME)
In January, the variety store chain announced a special dividend worth 20p a share, amounting to a total payout of about £200 million. The payout was in line with the company’s capital allocation framework and was paid on 29 January to shareholders.
For FY21, the company’s revenues increased 25.9 per cent to £4,801.4 million from £3,813.4 million a year ago. Adjusted EBITDA was up 83 per cent to £626.4 million from £342.3 million a year ago.
The stocks of the company were trading at GBX 566.80, down by 1.84 per cent on 26 July 2021 at 12:35 PM.
Ferguson Plc (LON: FERG)
The heating products and plumbing company in March declared a special dividend of 180 cents each share, which amounted to about $400 million, paid in May 2021. In January, the company finished the disposal of Wolseley UK and had said that it would return substantially all the net proceeds to shareholders through a special dividend.
For the half-year ended 31 January 2021, the company’s revenue increased 4.2 per cent to $10,309 million from $9,893 million. Its profit before tax increased 17.7 per cent to $739 million from $628 million.
The stocks of the company were trading at GBX 10,355.00, down by 0.39 per cent on 26 July 2021 at 12:37 PM.
Rio Tinto Plc (LON: RIO)
The mining company in February announced a special dividend of 93 US cents for each share, which represented a 72 per cent pay-out ratio for the full year. The company’s net earnings for the year ended 2020 stood at $9.8 billion and was 22 per cent higher than a year ago.
The consolidated sales revenue increased to $44,611 million from $43,165 million a year ago. Operating profit increased to $16,829 million from $11,466 million a year ago.
The stocks of the company were trading at GBX 6,048.00, up by 2.06 per cent on 26 July 2021 at 12:39 PM.