Piper Jaffray Companies (NYSE: PJC), an investment bank headquartered in Minneapolis, has gone all in on dividends.
Piper Jaffray announced that it will increase its quarterly dividend 20% with the next payment. The increase lifts the quarterly dividend to $0.375 per share from $0.3125. The new-and-improved quarterly dividend commences with the first quarter of 2018.
Piper Jaffray shares trade near $76 as I write. The higher dividend payment lifts the forward dividend yield to 1.5%.
A 1.5% dividend yield arouses little more than a shoulder shrug from most income investors. But there’s more to the Piper Jaffray dividend story than a 20% increase.
Piper Jaffray will begin to supplement its regular quarterly dividend with an annual special dividend next year. We’re not talking chump change, either. The annual special dividend will be 30% to 50% of non-GAAP net income (net income with non-cash charges added back) from the previous year.
I calculate non-GAAP of $108 million for the trailing 12 months. If we were talking the fiscal year, Piper Jaffray would deliver $32 million to $54 million to shareholders as a special dividend.
Piper Jaffray has 13 million outstanding shares. Investors would expect a special dividend between $2.50 and $4.15 a share.
The special dividend alone at the high end would generate a 5.5% yield. The one-time special dividend payment would yield more than 10 times the regular quarterly payment.
The profit opportunity extends beyond the special dividend, though.
Some of us were able to jump the gun with Piper Jaffray. We were able to up our yield and total-return potential.
Piper Jaffray issued a press release after the market close on Nov. 9. I notified our subscribers before the market open on Nov. 10. Investors who jumped on the notification were able to buy Piper Jaffray shares near $72. They’ve already realized $4 of share-price appreciation.
We’re not done yet. I expect Piper Jaffray’s share price to receive an additional jolt when the special dividend is declared early next year.
In short, investors have the opportunity to profit from three Piper Jaffray events: the announced special-dividend policy, the special dividend payment, and the potential share-price appreciation when the special dividend is declared.
The potential to collect a one-time 5.5% dividend yield and realize additional share-price appreciation on Piper Jaffray is attractive. Now imagine collecting one-time dividend payments that yield many times Piper Jaffray’s yield and offer the potential for even more share-price appreciation.
I recently identified a special dividend that produced a 41% yield. Investors were able not only to lock in a huge yield, they were able to capture additional share-price appreciation. The company’s share price is up 11% since the special dividend was declared.
The right special dividends offer immediate high-yield income. They also set the stage for future share-price appreciation.
But the “right” large dividends are the exception, not the rule. Most large dividends provide immediate high-yield income. Too often, though, the stock soon fades like a sugar junkie’s high.
Never suffer a sugar junkie’s high.
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