An increasing number of companies are paying dividends. And those payments are getting larger as a percentage of profits. As of the end of 2019, the average payout ratio among S&P 500 companies reached 36.2%. And total payouts for the prior year were a staggering $485 billion.

That’s about$1.3 billion in dividends per day.

At least, that’s the official count. The true payout is actually much higher. That’s because there are dozens of supplemental dividends that go unreported each quarter. By unreported, I’m not talking about some secret way of transferring cash to a select group of well-connected insiders. These extra payments are dished out openly and uniformly to all shareholders. But they are considered “special.” As such, these distributions aren’t reflected in the yields you see quoted on popular financial sites like Yahoo or Morningstar.

But trust me, the cash is just as green and spends just the same as any other dividend. And these special payments typically come in much bigger denominations, often 10 to 20 times larger than the firm’s regular quarterly dividend.

Huge Special Dividends In Recent History

There’s no special trick or complicated system to capturing these dividends — you just have to know where to look. For example, if you’re a long-term owner of the warehouse retail chain Costco (Nasdaq: COST), then you know exactly what I’m talking about.

In 2017, the company announced plans to hand out a special dividend of $3 billion, or $7.00 per share.

For context, Costco currently pays a quarterly dividend of $0.70. So the special distribution of $7.00 was equivalent to paying 10 current quarterly dividends all at once.

Even wilder is that this isn’t the first time this has happened: Costco paid out an identical special dividend in 2012. About that same time, casino resort owner Las Vegas Sands (NYSE: LVS) returned $2.4 billion ($2.75 per share) to its investors through a one-time cash payment. Department store owner Dillards (NYSE: DDS) got in on the act as well and decided to hand over $5.00 per share.

These were just three of 175 companies that made special dividend payments totaling $14.6 billion in November and December 2012. Granted, this was a period of unusually high activity. Dozens of companies were trying to beat the clock and avoid a possible dividend tax increase the following year. But even without that impetus, special dividends remain a popular way for companies to give a little something back — if you can call a few billion dollars “little.”

Vodafone (Nasdaq: VOD) paid a special dividend of $1.26 per share in 2014. And that’s actually modest for this type of transaction. Some distributions are much larger. The same year, Aircraft parts supplier TransDigm (NYSE: TDG) shelled out a one-time cash payment of $25.00 per share (a 13.1% yield).

Even Microsoft (Nasdaq: MSFT) has got in on the act — although it was admittedly a long time ago. In 2004, MSFT distributed a one-time special dividend of $3 per share, or $32 billion.

Where To Find Special Dividend Payers

But what about today?

Well, in the case of COST, it’s always a possibility. Back in February, the CEO told CNBC that special dividends are always on the table:

“We’ve done special dividends in the past. We always think about when the right time might be to do a special dividend. We have no plans right at the moment, but we always — we’ll always look at that.”

Barely a month goes by where I don’t see at least one or two announcements of upcoming special payments. And when I notice one that’s particularly enticing, I always let my High-Yield Investing premium subscribers know about it. Yet these special payments don’t usually get much fanfare. Unless you have your ears glued to the ground like I do, you probably wouldn’t even notice them.

But they are happening all the same.

Not every company that pays a special dividend will be a viable investment candidate. To be honest, some are not worth your time. But there are plenty of attractive, financially sound businesses that have embraced this method of rewarding stockholders.

That’s why I showcase companies that are rewarding investors with special dividends from time to time over at High-Yield Investing.

This information is typically only available to my paid subscribers, but today I’ll share the details on one pick that pays special dividends with you…

This 8% Yielder Makes 14 Dividend Payments A Year

Main Street Capital (NYSE: MAIN) is the only company I know of that regularly makes 14 dividend payments a year — 12 regular monthly payments and a pair of special distributions in June and December.

Main Street specializes in lending capital to mid-sized private businesses. The company has about 200 positions in its portfolio, many of which it also owns an equity position. The average weighted yield on these loans (split into three categories) ranges from 8.1% to 11.8%.

Importantly, the portfolio produced distributable net investment income (DNII) of $39.4 million (or $0.61 per share). That was enough to cover the ordinary dividend.

Then, of course, the Covid-19 outbreak happened…

In May, the company approved ordinary dividends of $0.205 per share for June, July, and August, totaling $0.615 for the quarter.

Now, as a business development company (BDC), the company is legally obligated to pass along 90% of its income to shareholders. But thanks to its conservative policy of lower regular payouts (and higher special dividends), the company has been able to preserve the regular dividend — but at the cost of the June special dividend.

Still, at the current rate, the company will distribute a total of $2.46 per share this year for a robust yield of 7.5%. (Remember, you’ll notice that sites like Yahoo might quote a different yield. Sometimes that figure only includes the regular dividends and doesn’t reflect the special payments. Or they may count the previous 12 payments, regardless of whether they were “special” or “regular”.)

Action To Take

In any case, few reputable companies offer yields that are three to four times the S&P 500 average. And most that do are shaky at best. But this business development company has the financial clout to make these outsized payments.

Since adding MAIN to our High-Yield Investing portfolio in 2015, we’re up by about 50% — and that’s despite the Covid-19 pandemic.

With a respectable quarter in the books, I expect this BDC to get back on track with the special dividend payments in short order. It’s worthy of strong consideration for any income investor.

P.S. If pulling down yields of 10% or more every year (before capital gains) sounds good to you, then you need to see this… My High-Yield Investing readers and I are pulling in sky-high dividend yields from little-known investments like the one I mentioned above. To learn more about these unique investments and how they just might change the way you invest forever, follow this link.