Dividends4Life: A Huge Dividend

A Huge Dividend

Posted by D4L | Tuesday, December 07, 2010 | 2 comments »

Companies paying special dividends believe they will do well in the future, and by collecting the special dividend you have the opportunity to reinvest in the business at a lower price or keep the cash to invest when bad times come around.

optionsXpress (Nasdaq: OXPS) recently announced it will be paying a special dividend of $4.50 per share on Dec. 27 to shareholders of record on Dec. 13. At current prices, optionsXpress will have a one-year yield of 26%! That puts its one-year yield higher than the current top high yielders American Capital Agency (Nasdaq: AGNC) (19%) and Chimera Investment (NYSE: CIM) (17.6%). While this is a one-time thing, hence the name "special", high yielders can be interesting situations.

Source: Motley Fool

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2 comments

  1. Anonymous // December 7, 2010 at 3:21 PM

    Very novice investor here.

    As I post this, the share price is $20.81. So if I buy 100 shares right now at $2081, on December 27th I'm going to get a $450 dividend? Why wouldn't I do that and then sell it all, spend about $26 on trading commissions ($12.99 each for the two trades) total, and pocket $425 easily? This sure seems like a "too good to be true" situation. Why hasn't the stock exploded much higher? I've got to be missing something.

  2. Dividends4Life // December 7, 2010 at 7:42 PM

    Anon: Theoretically,the stock will go down by the amount of the dividend. It doesn't always happen, but does more so with large special dividends.

    Best Wishes,
    D4L

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