Depending on the financial website, you may or may not know this stock is high yield. For instance, Yahoo Finance tells you this stock pays no dividends, and, therefore, it yields nothing.
Yahoo Finance might tell you one thing, but I know another. John B. Sanfilippo & Son (NASDAQ: JBSS) pays high-yield dividends. This year, JBS&S will pay $5 per share in dividends. JBS&S shares trade around $50; you’re looking at a 10% dividend yield.
I suspect that few income investors even know about this company with the patriarchal name. JBS&S is smallish, with $570 million market cap. Smallish, yes, but JBS&S is one of the world’s largest nut processors. You know JBS&S for its Fisher Nuts and Orchard Valley Harvest brands (and for most private-brand grocery store nuts and bulk offerings).
If you were to perform a dividend screen, JBS&S is unlikely to appear. This is despite the fact that the company has paid a dividend annually for the past four years. Depending on the prevailing share price and the prevailing dividend payout at the time, JBS&S shares have yielded between 3.5% and 10%.
So, why does JBS&S evade most dividend screens?
Special Dividends Are the Key
JBS&S, pays a dividend, to be sure, but it doesn’t pay a regular dividend. JBS&S dividends are special dividends. They’re not paid quarterly; they’re usually paid annually. You’re never sure when the dividend will arrive and what amount will be delivered. JBS&S has adopted this special-dividend model for a reason.
Management has admirably elevated the Fisher brand. The evolution can be seen in the variety of JBS&S packaging, from stand-up bags, composite and clear-plastic cans, poly-cellophane packages, to large cases and sacks for bulk sales to commercial customers. A stronger brand further insulates a company from market volatility.
That said, the nut business is still a commodity business. Price volatility can be problematic in a commodity business, as we’ve seen in the shaky financial performance of many commodity companies over the past two years. Earnings can vary considerably from year to year (though JBSS has maintained an upward trajectory in earnings growth over the past five years). Better to pay a dividend that’s based on current business conditions that doesn’t violate loan covenants than to risk reducing the payment on a stated dividend policy. Investors tend to frown on dividend reductions.
Instead, JBS&S pays special dividends, which have trended higher over the past four years. The special dividend in late 2012 was $1 per share; the special dividend paid earlier this summer was $2.50 per share.
JBS&S recently surprised investors when it announced that it will pay another $2.50 this calendar year. Exceptionally strong quarterly results, evinced by year-over-year revenue growth of 4.6% and EPS growth of 10.3%, appears sufficient to support two special dividends.
JBS&S’s unusual approach to distributing dividends appears to sit well with investors. Every time JBS&S has declared a special dividend, its share price has surged. Indeed, after the most recent announcement, JBS&S’s share price surged 13%.
Even more impressive, the share price has always recovered after the shares traded ex-dividend – when they were adjusted down by the dividend amount. Within months (and sometimes sooner), JBS&S shares were trading at the highs that prevailed before the ex-dividend date.
Exceptional Investment Opportunity
This is no surprise to me. When a company smartly rewards investors, its share price will recover to trend higher, even if there are fewer dollars on the books. JBS&S knows how to smartly reward investors: It retains the right amount of cash to run operations and grow the business, and it returns excess cash to shareholders, as every well-run company should.
Few investors know this, but special dividends – like those paid by JBS&S – can present an exceptional investment opportunity. Returns that go beyond the immediate payout occur when the right company pays the right special dividend.
If you’re interested in learning more about the right special dividends and their return potential, click here to receive a detailed report to learn about a unique investing strategy to generate superior returns.