Surprising and Special Dividend Stocks

Investors love to find catalysts for their stocks. Special situations such as spinoffs or restructurings can unlock hidden value and produce accelerated returns. It's an attractive way to play the market, and it's a method I follow in my Rising Stars Portfolio. But many investors overlook one of the best catalysts for stoking capital gains -- dividend increases -- since an increase signals management's confidence in the business prospects.

For dividend investors, special situations could involve companies that have just started a dividend. While many investors regard a dividend initiation as a tacit admission that the company cannot grow as fast as it once did and therefore exit the stock, a dividend also draws in a whole new investor base, too. Because income-focused indexes and other funds cannot buy a stock until it pays a dividend, there's pent-up demand for shares.

Source: Motley Fool

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