Shutterstock (SSTK) just declared a $3.00-per-share special dividend, an opportunity which generates a 6.5% yield, explains Steve Mauzy, income specialist and editor of Dividend Confidential.
Shutterstock’s special dividend will be paid on August 29 to shareholders of record on August 15. The ex-dividend date is August 14.
I like this special dividend because I like the company that will pay it. Shutterstock is a leading global provider of high-quality licensed photographs, vectors, illustrations, videos, and music. Its customers include businesses, media agencies, and media organizations.
Growth and low financial risk are immediate draws. Shutterstock’s annual revenue has grown to $579.9 million over the trailing 12 months from $328 million in 2014. That’s a 76.8% increase.
More growth is on tap for 2018. Management has guided for revenue to post between $625 and $635 million for the year. Revenue will grow 15%-to-17% year over year.
Management has guided for operating income to post between $30 and $35 million. Operating income will grow 14%-to-33% year over year. Recent quarterly financial results back management’s guidance.
The number of paid downloads for the second quarter posted at 45.2 million – a 5.9% increase compared to the year-ago quarter. Revenue per download posted at $3.41 – an 11.8% annual increase.
Shutterstock’s business is growing. The good news is that growth requires no external financing. It carries no long-term debt. What’s more, the share count dwindles. Shutterstock has repurchased 2.6 million shares for a total of $100.0 million under an ongoing repurchase program. An additional $100 million remains for additional share repurchases.
Shutterstock’s business also generates high levels of cash. Operating cash flow increased to $111.9 million over the trailing 12 months. Operating cash flow has trended higher since 2014. The company holds $289.8 million in cash and cash equivalents. The cash account has swelled 14.4% over the past year.
Shutterstock’s special dividend will consume $105 million of cash. The special dividend is affordable. It leaves the company sufficiently funded.
The special dividend is, in the words of the Board of Directors, “Consistent with our strategy of maximizing stockholder returns while allowing us to maintain a capital structure to fund our operations and growth initiatives.”
I concur. Shutterstock’s special dividend removes excess cash. It increases Shutterstock’s value proposition. The special dividend offers a potentially profitable trade opportunity for us.
Dividend-income investors should buy Shutterstock shares. The best entry price frequently occurs close to the dividend-declaration date. That said, you have until the close of trading on August 13 to buy Shutterstock shares to collect its $3-per-share special dividend and to open a dividend-income trade.
Capital gains investors should wait until August 14, the ex-dividend date, and then buy Shutterstock shares. The best entry price for a capital-gains trade frequently occurs on the ex-dividend date.
