Planning for a Special Dividend – Q&A with Calan Jansen


Calan Jansen

Calan Jansen, Vice President at F&M Bank
Infinex Financial Advisor with F&M Financial Services, Inc.

300 Stoney Creek Boulevard, Edinburg, VA 22824

(540) 325-5642

Question: What is a special dividend?

A special dividend is a non-recurring distribution of company assets to shareholders, usually in the form of cash. It is typically more lucrative compared to normal dividends paid out by the company and often tied to a specific event like an asset sale or other windfall. Special dividends are also referred to as extra dividends.

Question: Why does a company pay a special dividend?

A special dividend is paid out when a company wishes to make changes to its financial structure or does a spin off on part of its business. At times, it can also be issued to minimize tax burden to the company.

Question: How does a special dividend impact stock price?

Special dividends can have some drawbacks, such as reducing the share price of the company by the dividend amount. If an investor sells their shares directly after the dividend payment, at the lower price, they will cancel out the benefit of the special dividend.

Question: If the special dividend is reinvested, is it a taxable event?

Unfortunately, the issuance of a special dividend is a taxable event to the recipient whether or not it is reinvested. It is always best to talk with a tax professional for guidance.

Question: How can a financial advisor help?

A financial advisor can help navigate the pros and cons of receiving the special dividend. While it is typically a good thing to get an unexpected bonus, there are factors to take into consideration when deciding on dividend reinvestment, and how a large dividend – that was unexpected – can alter the balance of a portfolio. It is always recommended to seek the advice of a trusted financial professional.

Investment and insurance products and services are offered through INFINEX INVESTMENTS, INC. Member FINRA/SIPC. F&M Financial Services, Inc. is a nonbank subsidiary of F&M Bank. Infinex is not affiliated with either entity.

Securities and Insurance Products:

Not Guaranteed by the Bank | Not FDIC Insured | Not a Deposit | Not Insured by Any Federal Government Agency | May Lose Value Including Loss of Principal