Stocks With Special Dividend Potential

Special dividends are attractive to companies with cash to spare and high levels of inside ownership. A heavy insider presence is a factor right now because these payments represent a last chance to pocket some cash while paying a maximum of 15% in federal taxes. The 15% cap on taxation of dividend income -- part of the Bush Administration's set of tax cuts in 2003 -- is set to expire at the end of the year, and it would seem Congress has bigger fish to fry, such as the Gulf oil spill and financial reform, at the moment.

While having excess cash is a wonderful thing, it's important to consider a company's longer term prospects as well. Investors with short-term horizons need to remember that -- all things being equal -- the special dividend "comes out of the share price" on the ex-dividend date. That's the date on which you need to be an investor of record to be eligible to receive the dividend.

Source: TheStreet.com

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