By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
The panel agrees that the article misleads by highlighting 'true' yields based on special dividends, which are often one-time, cyclical, or discretionary. These yields can evaporate in downturns, exposing investors to significant risks.
Risk: The evaporation of 'true' yields in a downturn, leading to income loss and potential stock price pressure.
Opportunity: None identified.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
Using vanilla websites for your dividend research? Be careful.
Many of these mainstream sites miss the most important payment of the year for "special" dividend companies!
This oversight could have us overlooking thousands of dollars in potential yearly income. And yields up to 14.6%!
Would you believe what this 14.6% payer is listed at on these lame sites? 0.2%. Zero-point-two percent.
Yup. Which is why we contrarians do our research with a focus on special dividends.
Specials uncommon enough that many investors don't know much (if anything) about them. In short, they're one-time cash payouts, usually the result of a massive capital boost--say, selling off a piece of the company or delivering blowout annual profits.
At least, usually that's the case.
Some stocks pay out so-called "supplemental" dividends that they pair with regular distributions. Let's say a company pays out 50 cents per share quarterly, but at the end of the year it pays out half of its free cash flow as a supplemental dividend. That might be an extra $1 in one year, $3 in another.
In some cases, it's a tidy little "top-up" that makes a nice dividend a little nicer. But sometimes, these special dividends take a decent to even modest yield and turn it into an eye-popping payout in the high-single or even double digits.
Just check out this seven-pack of "special" payers. While financial dividend sites would tell us they're paying a collective 6% on average, in reality, this mini-portfolio's true average yield is a mouth-watering 10%.
Retailers
Let's start with an unlikely pair--two mall names most income investors wouldn't touch with a ten-foot pole.
I wouldn't want to share a foxhole with Dillard's (DDS, 0.2% headline yield) and The Buckle (BKE, 2.9% headline yield). They're both mall plays--the former is one of the few remaining department-store chains, while the latter is a fashion retailer, which is as fickle as a business gets. Economic shivers give both the fits, and a pressured consumer has both well in the red so far this year.
But to their credit, they've been two of the better mall names in recent years, and their practice of topping up modest regular dividends with large specials as profits allow is a great model for their cyclical businesses.
They're also both sterling examples of just how much yield is "hidden" from us. Just look at what a top data provider lists for each, and what their actual yields are.
Dillard's
That microscopic payday only factors in Dillard's 30-cent quarterly dividend. But DDS has been paying enormous special dividends for years--$15 per share in 2021 and 2022, $20 in 2023, $25 in 2024, and $30 in 2025. Including that last special, Dillard's true yield is 5.9%.
The Buckle
The Buckle's regular payout is at least respectable at just shy of 3%. But that's a far cry from the real number, because like Dillard's, BKE has been handing out large specials to start each of the past few years. Add 2026's $3-per-share special on top of its 35-cent quarterlies, and Buckle's true yield is 9.1%.
Fair warning: Management isn't promising us those fat specials. But they've clearly signaled they're willing to share the wealth when times are good. And that's a nice potential bonus for anyone who was already planning on taking a flyer in the retail space.
Insurers
Insurers are basically in the business of pricing chaos, so it's almost strange that so many of their dividends are the same year in and year out. Regular-and-special systems make a lot more sense given their cyclical earnings.
Amerisafe (AMSF, 5.2% headline yield)--a workers' compensation insurer with a focus on small to midsized employers in "high-hazard" industries such as construction, trucking and agriculture--is something of an outlier in this area in that its bottom line is much more stable than the average insurer.
But that doesn't mean its profit situation is necessarily good.
I mentioned in 2025 that anyone interested in AMSF's big special dividends should keep a close eye on Amerisafe's bottom line. While Amerisafe has been able to grow its top line consistently, the company's profits have declined in each of the past two years. Wall Street analysts covering the stock believe that'll happen again in 2026, and that 2027 earnings will merely remain level. One of the biggest culprits has been slowing job growth, which has become downright anemic in the past year or so.
This has really cramped Amerisafe's special distribution. AMSF has been writing regular dividend checks since 2013 and specials since 2014--and 2025's extra payout, while still enough to boost the true yield to 8.4%, was the smallest in a decade.
The Only Good News? The Modest Regular Dividend Continues to Grow
Old Republic International (ORI, 3.1% headline yield) is a specialty and title insurance company that operates in the U.S. and Canada. The title segment of the business provides protection against losses over real estate disputes, and provides escrow closing and construction disbursement services. The specialty insurance segment is much wider, including commercial auto, commercial property, travel accident, aviation, environmental, cyber, and numerous other coverages, offered up to a variety of industries, including transportation, healthcare, education, retail, energy and more. It also plays in Amerisafe's workers' comp sandbox.
ORI's top line has generally trended higher for decades, but its bottom line is the erratic mess we'd expect out of an insurer--even one as well-diversified as Old Republic.
So we have to tip our hats to management, which has made ORI one of the most prolific dividend growers on the market despite this uncertain profit footing. Old Republic boasts a full 45 years of consecutive annual distribution hikes. Management is quick to throw extra dividends at shareholders when profits allow, too--and those special dividends can be massive. A $2.50-per-share special on top of its 31-cent regulars comes out to a true yield of 9.4%.
But because ORI's business is more unpredictable than the likes of an Amerisafe, the specials are spottier.
**Timing Is All Over the Place, And ORI Skipped a Special in 2023 **
Business Development Companies (BDCs)
In general, "normal" stocks that pay regular dividends tend to offer up decent-but-not-great regular dividends, then blow us away with fat specials when they can.
Business development companies (BDCs), which provide financing to smaller firms, take a different tack. That is, they pay regular dividends that in and of themselves put almost every other sector to shame--and when net investment income is sufficient enough, they'll sweeten them even further with top-up specials.
Take Capital Southwest Corp. (CSWC, 10.0% headline yield) for instance.
CSWC provides capital to lower middle market firms with EBITDA (earnings before interest, taxes, depreciation and amortization) of between $3 million and $25 million. The vast majority (90%) of its deals are first-lien loans, most of the rest (9%) is equity, though it has sprinklings of second-lien loans and subordinated debt. It has a diversified portfolio of 131 companies representing a couple dozen industries; healthcare services, consumer services, media/marketing and consumer products are the best-represented right now.
The BDC industry is a difficult one where losers greatly outnumber winners. But I've said before that CSWC is a standout--it has moderate leverage and a well-covered dividend. Meanwhile, special dividends add a full percentage point, for a true yield of 11%.
Better still? Capital Southwest recently converted its payout system from quarterly to monthly distributions.
It admittedly makes for a bizarre chart.
But the Recent Dividend Cadence Is Pretty Steady
The only glaring weakness here is a premium valuation to match CSWC's premium performance. Right now, Capital Southwest's shares trade at a whopping 40% above the BDC's net asset value (NAV).
Fidus Investment Corp. (FDUS, 9.2% headline yield) invests in a wide range of lower middle market companies, preferring firms with proven business models and strong free cash flows. Target companies typically have annual EBITDA of $5 million to $30 million. Its deal mix is more diversified than CSWC, with about 80% in first-lien debt, 7% in each of subordinated debt and equity, and the remaining 6% in second-lien loans.
Fidus has 97 portfolio companies at the moment. And while they're spread across a couple dozen industries, FDUS leans heavily into information technology service firms, which make up more than a third of the portfolio at cost. However, while tech exposure has been an anvil tied to the ankles of numerous other BDCs, AI seemingly hasn't been weighing on its holdings--Fidus has outperformed the sector by about 15 percentage points over the past year.
FDUS does have a dividend strike against it in that it cut its regular payout during the pandemic. But it quickly worked to restore the distribution to--and eventually past--pre-COVID heights. The pandemic also marked a shift from annual top-ups to quarterly top-ups.
Fidus' Quarterly Specials Vary Widely
The specials over the past 12 months take Fidus from a headline yield of 9.2% to a true yield of 11.8%.
Unlike with CSWC, we're not being forced to overpay for FDUS' relative business strength. Shares currently trade at a modest 5% discount to NAV.
Bain Capital Specialty Finance (BCSF, 12.8% headline yield) is one of the more geographically diversified BDCs, providing a variety of financing solutions to over 200 companies not just in North America, but also Europe and even Australia. It primarily deals in first-lien debt, which makes up a little more than 80% of its deal mix. Equity and preferred equity each make up about 7% apiece, but it also works with subordinated debt (3%) and second-lien loans (1%).
Bain Capital has delivered mixed results since its initial public offering (IPO) in 2018. It had caught its stride in recent years, but took a step back in 2025 before getting back up to speed this year. Non-accruals (loans not accruing interest because they're past due, usually by 90 days or more) of just 1.4% are well below the BDC average of nearly 4%. Software makes up 13% of the portfolio, but CEO Michael Ewald said in the Q1 conference call that a recent review showed "the majority of our software investments carry a relatively low risk of AI-driven disruption."
BCSF is also easily the cheapest of the three BDCs here, trading at a steep discount to NAV of 22%.
But There Are Signs of Trouble in the Dividend
Bain Capital pre-announced 3-cent specials across all of 2025, then ended the year by announcing an additional 15-cent special to be paid in early 2026. After that, however, it has announced two quarterly dividends with no specials.
Once we factor in specials paid over the past 12 months, BCSF's true yield is 14.6%. But it's possible that number is overshooting its future yield--and not only because we can't count on specials. The pros are projecting that Bain Capital's earnings will be barely enough to cover the dividend this year, and will fall well short of the payout in 2027.
My Favorite 11% Dividend Is a Cure for 2026's Chaos
We're drawn to double-digit dividends because they give us a way out.
A way out of panicking over massive daily swings. A way out of scanning headlines for the latest tariffs and policy changes. A way out of constantly wondering whether AI is going to obliterate our portfolios.
So if we're going to take a swing on a double-digit yield, we want dividends we can count on--where special dividends are merely the cherry on top.
That's exactly what we're getting from one of my favorite home-run dividends: a heavily diversified, brilliantly built bond portfolio that yields 11% but is also set up for stock-like gains.
This fund checks off just about every income box I can think of:
The manager's credentials? About as good as it gets. Morningstar previously named him Fixed Income Manager of the Year. And he's literally a hall-of-famer, honored by the Fixed Income Analysts Society Hall of Fame.
But the window on this home-run dividend is closing fast! Premiums on funds like these tend to rise as volatility ticks higher and as investors rotate out of growth stocks and into reliable sources of income like this. I don't want you to miss your chance. Click here and I'll introduce you to this incredible 11% payer and give you a free Special Report revealing its name and ticker.
Warren Buffett Dividend Stocks Dividend Growth Stocks: 25 Aristocrats
Future Dividend Aristocrats: Close Contenders
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"Special dividends are unreliable supplements that mask underlying business volatility and valuation risks the article largely ignores."
The article correctly flags that headline yields on DDS, BKE, AMSF, ORI, CSWC, FDUS and BCSF understate recent payouts once large specials are included, lifting the seven-stock basket from 6% to 10%. Yet it downplays that these extras are discretionary, tied to one-time capital events or volatile earnings. Retailers face consumer pressure, insurers report declining profits, and BDCs show rising non-accruals plus NAV premiums or discounts that can erase yield advantages. The closing teaser for an unnamed 11% monthly payer with a star manager is classic marketing that omits fees, leverage and distribution coverage risks.
Specials have been paid consistently enough by these names in recent years that a patient holder could still capture elevated income even if future extras shrink, especially in the cheaper BDCs trading below NAV.
"Treating optional special dividends as recurring income is a classic yield-chasing trap that collapses when earnings compress or balance sheets tighten."
This article conflates two separate problems: (1) legitimate yield underreporting by data providers on special-dividend payers, and (2) a sales pitch disguised as analysis. The stocks cited—DDS, BKE, AMSF, ORI, CSWC, FDUS, BCSF—do pay specials that inflate true yield above headline rates. That's factual. But the article cherry-picks backward-looking specials, treats them as recurring, and obscures deteriorating fundamentals (AMSF's profit decline, BCSF's coverage compression, retail cyclicality). The unnamed 11% bond fund at the end is a classic bait-and-click tactic. Specials are *optional*, not contractual—they evaporate in downturns.
If you own these stocks for 10+ years and reinvest specials, the total return math might still work despite cyclical headwinds; the article's core insight about hidden yield is valid even if the sales execution is manipulative.
"Treating historical special dividends as a reliable forward yield is a fundamental accounting error that ignores the cyclical earnings volatility inherent in these sectors."
The article conflates 'trailing' yield with 'forward' income, a dangerous trap for income investors. While highlighting special dividends is a valid strategy for identifying cash-rich firms, it ignores the cyclical nature of these payouts. For BDCs like BCSF or retailers like DDS, special dividends are often a release valve for excess capital during peak cycle earnings, not a recurring annuity. When earnings contract—as projected for AMSF and BCSF—these 'true' yields evaporate. Investors chasing these payouts are effectively selling volatility protection for a yield that is inherently unstable, often ignoring that a 40% premium to NAV (as seen in CSWC) significantly erodes the total return potential of the dividend itself.
The strategy correctly identifies that market pricing often fails to account for consistent, albeit variable, capital returns, potentially allowing contrarians to capture high cash flow at a discount.
"Most advertised 'true yields' rely on unpredictable one-time specials rather than durable cash flow, making the high-yield math fragile across a full cycle."
The piece sells a high-yield fantasy built on 'special' dividends. The core risk is that most of the 10%–14% yields come from one-time payouts rather than durable cash flow. In cyclical retailers (Dillard's, The Buckle) and credit-sensitive insurers or BDCs, specials are episodic and can vanish or reverse quickly in a downturn, stripping away income and pressuring stock prices. The article glosses over distribution coverage, earnings volatility, and the possibility of cuts; it also cherry-picks a few winners while ignoring many non-holders where specials are absent. Investors should stress-test yield stability across a full business cycle, not a single-year snapshot.
Strongest counter: these 'true yields' hinge on episodic payouts that can disappear in a downturn, leaving investors with lower regular income and potential price losses. The article's universe looks baked for favorable years; in a real macro shock, the math won't hold.
"Leverage plus persistent fees create an unmentioned amplification of losses for these BDCs in downturns."
Gemini understates how leverage in BDCs like CSWC and BCSF can magnify both distributions and downside NAV erosion during credit stress. Pairing this with ChatGPT's recession scenario, forced deleveraging plus management fees could turn the touted 10% basket yield into negative total returns faster than cyclical dividend cuts alone would imply. The panel has yet to quantify the fee drag that persists regardless of special payout frequency.
"Leverage magnifies BDC downside, but equity cyclicals face an even sharper cliff because they lack the structural seniority that protects BDC debt holders."
Grok flags leverage amplification—valid. But the panel hasn't separated BDC structural risk from equity cyclicals. CSWC trades at 40% premium to NAV; forced deleveraging hits equity holders last, after preferred and debt. DDS/BKE have no leverage cushion—their specials vanish on revenue contraction alone. Fee drag is real but secondary; the primary risk is that 'true yield' assumes earnings stability that doesn't exist in a 2-3% recession. Nobody's modeled what happens if retail comps turn negative *and* credit spreads widen simultaneously.
"Special dividends in retail are a tax-inefficient capital return mechanism that masks deteriorating fundamentals and sets up a violent valuation correction when payouts are inevitably suspended."
Claude, you’re missing the tax-efficiency variable. For retail names like DDS and BKE, special dividends are often a tax-inefficient way to return capital compared to buybacks. If the market prices these as 'yield,' it creates a valuation floor that is fundamentally fragile. When growth slows, these companies stop the specials first. Investors holding for income are left with a low-growth, cyclical retail equity that has lost its only catalyst, leading to a double-whammy of dividend cuts and multiple compression.
"The true risk is payout sustainability, not tax efficiency, because episodic specials can disappear, eroding income and total return."
Gemini’s tax-efficiency critique matters, but the bigger overlooked risk is the sustainability of the payouts themselves. Specials can be funded by debt or asset sales and collapse in a downturn, yet markets often misprice the resulting distribution coverage and price, especially when a few names dominate the basket. The punchline isn’t just tax drag but the likelihood that a 10% 'true yield' reverts to much lower cash flow once earnings cycle turns.
The panel agrees that the article misleads by highlighting 'true' yields based on special dividends, which are often one-time, cyclical, or discretionary. These yields can evaporate in downturns, exposing investors to significant risks.
None identified.
The evaporation of 'true' yields in a downturn, leading to income loss and potential stock price pressure.