Two Stocks Offer Special Dividends To Investors (AOL, FSCI, MSFT, GOOG, AAPL, TWX)
Jim Trippon: Investors in stocks AOL (NYSE:AOL) and Fisher Communications (NASDAQ:FSCI) had to feel the glow of holding onto a lucky winner the other day, when both companies announced special dividend payments. As part of a plan to return $1.1 billion to shareholders, AOL will pay shareholders a one-time dividend of $5.15 per share in December. The special dividend payment will amount to a total payout of $500 million.Also included as part of the $1.1 plan is a $600 million stock repurchasing program. AOL has been sitting on $1 billion in extra cash from the proceeds of patent sales to Microsoft (NASDAQ:MSFT). The stock rose 65 cents on the news, for a 2 percent gain, to $33.57 a share.
AOL Two Year Chart
Fisher Communications announced that a $10 per share special dividend will be paid on October 19th. The company will also begin paying a regular quarterly dividend as well starting g in the fourth quarter of 2012 with a 15 cent payment. Fisher will pay out a total of $89 million for the special dividend, which will be funded from cash and cash equivalents currently on hand. Fisher stock surged $2.29 a share on the news, a 6.8 percent gain, to $36.11 after the news was announced. The stock closed at $36.99 at the end of the same trading day, for a further gain.
A Bonus For Investors
Special dividends are occasionally paid by companies when events or circumstances in the company business may warrant a one-time payment but not necessarily an increase in the regular dividend, if there is one. Sometimes extremely strong earnings are the genesis of a special dividend, but in the last several years, more corporations are sitting on cash and have been reluctant to distribute it with one time payouts. Many investors will recall Microsoftâ€™s special payment of $3 per share in 2004, as a way of sharing its large accumulated cash with shareholders. Other companies, most notably Apple (NASDAQ:AAPL), recently decided to deploy some of its huge cash pile by initiating a regular dividend payment to shareholders, where Google (NASDAQ:GOOG), for example, has not.
Legacy Of Trouble
In the case of AOL, its history has been that of a troubled media-internet company which had routinely underperformed until it was finally spun off by Time Warner (NYSE:TWX). AOL has been criticized and challenged for its acquisitions and business operations, which saw its patent sale push its earnings into the black in the second quarter this year, in contrast to its second quarter loss in 2011. News of the special dividend and the stock buyback plan have caused AOL shares to rise to a near all-time high since its split from Time Warner.
There are still questions and concerns about the viability of AOLâ€™s business going forward. The one-time cash infusion from the patent sale masks that the company still depends on its declining legacy dial up internet business for a substantial part of its revenue. Its acquisition for $300 million of The Huffington Post will need to contribute strongly for there to be a better profit picture down the road. Beyond that, AOL will still need to develop more new business to go with its banner ad business. So the one-time payment may entice shareholders, but it doesnâ€™t answer questions about AOLâ€™s long term prospects.
Fisherâ€™s Story Different
While one can reasonably argue that AOLâ€™s special dividend is a one-shot attempt at boosting shareholder interest in a company with mediocre prospects, the much smaller Fisher Communications is a different story. Fisher, a regional niche player with a $300 million market cap, in contrast to AOL with its $3 billion market value, is a company thatâ€™s been around slightly more than 100 years, owns radio and tv stations in the western US, and also features an internet business segment. Fisherâ€™s business results have strengthened, particularly beginning the fourth quarter of last year, as it climbed out of the red after 2009, and the company has been making steady progress since. The revenue picture has improved since 2009 also, and Fisher has a sparkling balance sheet with no debt. Many of the metrics for Fisher point to the potential for a value play here, though we realize that the broadcasting and media sector can be very difficult.
Fisher Communications Five Year Chart
Source: Yahoo Finance
Investors should keep in mind that a special dividend, just like a juicy regular dividend, doesnâ€™t necessarily make a stock a good investment. Each stock needs to be assessed on an individual basis. The fundamentals of the company behind the stock should still and always be an important consideration.
Jim Trippon, founder ofÂ Trippon Financial Media, Inc., is a maverick that has dedicated his investment career to helping investors make smarter financial and stock selection decisions. Trippon,Â an internationally recognized expert on global andÂ valueÂ investing, has a deep passion for finding hidden value in global equity markets. Trippon started his career as a financial statement examiner with Price Waterhouse which allows him to dissect a public companyâ€™s financialÂ picture and better identify hidden gems. Tripponâ€™s savvy approach toÂ investingÂ and personalÂ financeÂ makes him in high demand by major media who seek his unique perspective on stocks and global economics. He hasÂ been featured in top publications both in the US and abroad includingÂ Bloomberg, Investorâ€™sÂ BusinessÂ Daily,Â TheÂ NewÂ YorkÂ Times, The International Herald Tribune,Â StockÂ FuturesÂ and Options Magazine, The Bull and Bear Financial Report and he regularly appears on broadcast television including as an on air contributor to CNBC, CNN, Fox Business, and Fox News.
This information was brought to you by GlobalProfitsAlert.com, a publication of Trippon Financial Research, Inc.Â GlobalProfitsAlert.comÂ publishes information on Investing in the ChinaÂ stockÂ marketÂ and emerging markets, dividend stock and income investing,Â exchange tradedÂ fundsÂ (ETFs), green energy stocks,Â technologyÂ stocks, global market trends and otherÂ investmentÂ information. To view archives or subscribe, visitÂ www.globalprofitsalert.com.