Legal Definitions - nonrecurring dividend

A nonrecurring dividend is a special, one-time payment made by a company to its shareholders that is separate from its regular, scheduled dividend distributions. Unlike ordinary dividends, which are typically paid out at regular intervals (e.g., quarterly or annually) from ongoing profits, a nonrecurring dividend is usually issued due to an unusual event, a significant one-time gain, or a strategic decision to distribute excess capital. It is not expected to be repeated regularly.

• Example 1: Sale of a Major Asset

  Tech Innovations Inc., a software company, sells its struggling hardware division to a competitor for a substantial profit. Rather than reinvesting all of the proceeds, the board of directors decides to distribute a portion of this one-time gain to its shareholders. They announce a special dividend of $5 per share, in addition to their usual quarterly dividend of $0.50 per share.

  This $5 per share payment is a nonrecurring dividend because it stems from a unique event (the sale of a division) and is not part of the company's regular, ongoing profit distribution. Shareholders understand this is a one-off payment, not an increase in their regular dividend income.

• Example 2: Unexpected Financial Windfall

  PharmaGen Corp., a pharmaceutical company, wins a major patent infringement lawsuit against a rival, resulting in a settlement of $500 million. This unexpected financial windfall significantly boosts the company's cash reserves. The board decides to issue a one-time "special dividend" of $3 per share to its investors, celebrating this legal victory and sharing the proceeds.

  This $3 per share dividend is nonrecurring because it arises from an extraordinary, unpredictable event (the lawsuit settlement) rather than the company's routine operational profits. It is not something shareholders would expect to receive again in the normal course of business.

• Example 3: Return of Excess Capital

  Global Manufacturing Co. has accumulated a large amount of cash over several years, exceeding its immediate needs for expansion or debt reduction. After reviewing its capital structure, the company's management decides to return some of this excess capital to shareholders through a large, one-time dividend payment of $10 per share. This is distinct from their regular annual dividend.

  This $10 per share payment is a nonrecurring dividend because it's a strategic decision to distribute accumulated excess capital, not a distribution of ongoing operational profits. It's a one-time event aimed at optimizing the company's financial structure, and shareholders would not anticipate such a large payment to be part of their regular dividend stream.