December is a busy season. There’s last-minute shopping, kids are out of school, travel plans… you name it.

It’s easy to get lost in it all. And if you’re an income-minded investor, it’s easy to forget that December is the special time of year when a handful of companies make a habit out of paying their shareholders an extra, one-time distribution.

In short, it was a gift. A “special” gift.

Over the past few weeks, I’ve written about special dividends in detail. So for a more in-depth explanation of special dividends, I recommend going back and reading that piece. But think of it as a year-end bonus that only a select few companies pay. And since these payments aren’t widely advertised, you have to be “in the know”.

I’ve also shared the names of some of my favorites: Universal Insurance, Main Street Capital, RLI, and Buckle.

And today, to end 2022 on a high note, I want to tell you about one more…

One More Special Dividend Favorite

Among the more notable special dividend payers out there, Dillard’s (NYSE: DDS) board just approved a payment of $15 per share.

That’s equivalent to 75 regular quarterly dividends of $0.20.

Management credited “great results.”

The cash windfall is payable on January 9th, and the next regular quarterly dividend is scheduled for January 30th to stockholders of record on December 30th. This means you can still get in on this as we publish. But understandably, some of you probably won’t be reading this until after the fact. So why even bring it up?

Two reasons. First, as is customary, the shares will likely decline by roughly the distribution amount on the ex-dividend date to reflect the payment. So for those who practice dividend reinvestment, you would essentially get to the same place post-distribution — without the tax liability.

More importantly, this isn’t the company’s first special payout, and it may not be the last. It made an identical payment of $15 per share this time last year. Furthermore, I expect a hike in the regular distribution, which has already doubled in size since 2019.

Worth A Look…

To be sure, the department store anchor still has some questions that must be answered. But you don’t commit to a 100% dividend increase without assurances in the cash flow column.

The scaled-down chain (250 stores in 29 states) is seeing some traction, reporting a healthy 8% sales increase year-to-date. Some stronger categories include cosmetics, men’s apparel, and home furnishings.

Dillards has managed to maintain gross margins north of 40% for seven straight quarters now. In turn, a good chunk of that incremental sales growth is filtering down to the bottom line. Net income over the past nine months has climbed 11% to $600 million.

In most cases, that gain would be diluted on a per-share basis as companies frequently print new shares. But Dillard’s has aggressively repurchased stock, steadily reducing the number of outstanding DDS shares from 21.0 million a year ago to 17.7 million today.

So that 11% increase in net income has fueled a much stronger 32% increase in earnings per share (from $25.76 to $34.05). The low payout ratio provides flexibility for another meaningful dividend hike.

Action To Take

While changing shopping behaviors and other headwinds persist, the omnichannel Dillard’s brand is clearly alive and well. Trading at less than six times earnings, this special dividend payer could surprise investors in 2023.

In the meantime, if you want to know about my absolute favorite high-yield picks, you need to check out my latest report…

In it, you’ll find 5 “Bulletproof Buys” that have weathered every dip and crash over the last 20 years and STILL handed out massive gains. And each one of them carries high yields, with dividends that rise each and every year. Go here to check it out now.