Q: Softchoice issued a special $4 dividend today as part of their quarterly results. Any thoughts as to why they issued such a large special dividend?
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5i Research Answer:
Special dividends can come from a variety of reasons: a) The company is doing well and wants to reward shareholders b) It has too much cash for its needs c) The company may be being pressured by large shareholders to add value d) Insiders may own a lot and just want to get 'paid' in a tax-efficient manner e) The company is worried about a takeover and wants to reduce its cash to make it less attractive. There are other possibilities as well. The company does not state its own reason, but with insiders and three shareholders owning 73% of the company, we imagine it was from some internal pressure, considering the company is borrowing money to pay the special dividend.