Did you know that dividends among S&P 500 companies have set new record highs in 8 of the past 9 years?

Despite the financial fallout of the Covid-19 pandemic, these companies disbursed $483 billion to their stockholders in 2020, or approximately $1.3 billion per day.

At least, that’s the official count. The true payout is even higher. That’s because there are dozens of supplemental dividends that go unreported each quarter. By unreported, I’m not talking about some secret way of transferring cash to a select group of well-connected insiders. These extra payments are dished out openly and uniformly to all shareholders. But they are irregular and non-recurring.

So by definition, they are considered “special,” not ordinary. As such, these distributions aren’t reflected in the yields you see quoted on popular financial sites like Yahoo or Morningstar.

But trust me, the cash is just as green and spends just the same as any other dividend. And these special payments typically come in much bigger denominations, often 10 to 20 times larger than the firm’s regular quarterly dividend.

There’s no special trick or complicated system to capturing these dividends — you just have to know where to look…

Like Getting Years Of Dividends… All At Once

If you owned shares of Equity Residential (NYSE: EQR) in September 2016, then you’ll never forget it…

The real estate company had just sold 23,000 apartment units in a blockbuster transaction that netted $5.3 billion in proceeds. After due consideration, management decided to return this financial windfall to stockholders in the amount of $3.00 per share.

This payment was in addition to the regular scheduled quarterly dividend of $0.50 per share.

In other words, this bonus distribution was equivalent to disbursing the next six quarterly payments all at once. So in one day, investors were showered with more cash than they would ordinarily have received in 18 months.

A decade ago, special dividends like this were few and far between. But that all changed at the end of 2012. Fearing a potential dividend tax hike the following year, 175 different companies shelled out extra cash in November and December to “beat the clock.”

Casino owner Las Vegas Sands (NYSE: LVS) was one of those, returning $2.4 billion in house winnings (or $2.75 per share). Department store owner Dillards (NYSE: DDS) made a generous payment of $5.00 per share. These were just two of dozens to make special distributions during that 60-day span totaling $14.6 billion.

Granted, this was a period of unusually high activity. But it ushered in a new era.

I’ve found many special dividend payers in my investment career. A couple years ago, I uncovered a $132 million special dividend from a tiny Canadian mining outfit called Lucara (OTC: LUCRF). Several months before, the company unearthed a monster 1,111 carat gem at a diamond mine in Botswana. Dubbed Lesedi La Rona, it was the second largest diamond ever found, worth an estimated $70 million.

This find, along with many other high-grade stones, helped fund a special dividend of $0.35 per share. That was 23 times greater than the regular quarterly dividend — and equivalent to 12% of the share price at the time.

This is hardly an isolated example.

Citing a “strong balance sheet and favorable access to credit markets” discount retailer Costco (Nasdaq: COST) handed out a special dividend in the amount of $3.1 billion, or $7.00 per share. With the regular quarterly payments set at 50 cents per share, this payment in May 2017 was like getting 14 dividends at once.

Some distributions are even larger. In August 2019, aircraft parts supplier TransDigm (NYSE: TDG) delivered a whopping one-time cash payment of $30.00 per share.

Barely a week goes by where I don’t see at least one or two announcements of upcoming special payments. They don’t get much fanfare. Unless you have your ears glued to the ground like I do, you probably wouldn’t even notice them.

But they are happening all the same. Retail. Telecom. Utilities. They can come from almost any sector.

And I think we’re about to see a lot more…

I’ve Found A Group Of “Serial” Special Dividend Payers

Of course, not every company that pays a special dividend will be a viable investment candidate. To be honest, some are sketchy. But there are plenty of attractive, financially sound businesses that have embraced this method of rewarding stockholders in the past, including Dish Network (Nasdaq: DISH), Best Buy (NYSE: BBY) and Microsoft (Nasdaq: MSFT).

So where does the cash come from? Occasionally (when funding is cheap) it is borrowed. In other cases, management is preparing for a corporate restructuring or returning the proceeds from an asset sale. That was the case with National Grid (NYSE: NGG). The U.K. utility giant recently unloaded some non-core gas distribution operations. That divestiture paid for a hefty special dividend of $5.42 per share (8.2% yield).

Typically, though, these special dividends come from retained profits that have built up on the books.

These distributions are normally random and sporadic. But not always. Some “Serial Payers,” as I refer to them, have a stated policy of returning surplus earnings on a regular basis… often in the form of a year-end cash bonus.

Because operating conditions vary from year to year, the size of these payments will depend on the success of the business — the bigger the profit, the bigger the special dividend.

So what can we infer about these Serial Payers? Well, first off it’s clear that they are run in a shareholder-friendly fashion. Furthermore, we know that they are generating ample cash… enough to run the business, pay a regular dividend stream, and still have excess to distribute most years.

Considering ordinary dividend-payers have consistently outperformed the market for decades, it shouldn’t come as a surprise to hear that special payers (which go above and beyond) tend to produce superior returns. Many of the stocks I have tested have outrun the S&P 500 by a comfortable margin over the years.

In fact, I found 11 stocks that have paid special dividends for three or more consecutive years — the average was 10 years, and the most was 27 years. I compiled these into an index and found something quite remarkable…

Many of these special payers have trounced the broader market over the long haul. All of them have delivered positive returns over the past five years, and nearly half of those have delivered cumulative gains of 200% or more.

Action To Take

Now, out of fairness to my High-Yield Investing subscribers, I cannot share all of the names of these stocks with you today. But one of these stocks is RLI Corp (NYSE: RLI), a specialty insurance company that likes to gift-wrap year-end underwriting profits for investors. Like clockwork, the insurer makes supplemental payments every December … $2.00 per share in 2015 and 2016, $1.75 in 2017, and $1.00 per share in 2018, 2019 and 2020.

So while RLI’s quoted yield of around 1.0% is hardly compelling, that figure dramatically understates what stockholders are really receiving. Aside from ordinary dividends (which have risen for 45 straight years), investors have been treated to nearly $16 per share in cumulative special payments since 2012.

And not surprisingly, the stock has attracted plenty of buying interest. In fact, it has delivered a market-crushing total return in excess of 1,900% since 2001.

The point is, it clearly pays to keep track of these special dividend payers.

My advice: do some research and find stocks that have a well-documented track record of dishing out special dividends. It’s not a good reason alone to buy, but if the rest of the investment thesis checks out, you’ll be glad you did.

P.S. I just released an updated, special report that reveals the names and ticker symbols of all of these Special Dividend payers to my High-Yield Investing subscribers. And I keep a close eye on special dividend payers and report anything that catches my attention to my readers in each issue of my premium newsletter.

So if you’d like to learn more about my favorite special dividend payers — and get access to all of my latest research, go here right now.