Sofas Vs. Cyber Safety: Which Has Better Dividend Potential?

As we are in the thick of the June quarter earnings season as well as rising delta variant case counts -- and the return of some restrictions -- we're also hearing quite a bit about rising input costs, supply chain constraints, and companies taking price action to shore up their profits. It's a frenetic time, and it's quite likely at some if not more readers will miss some of the news being disseminated. It happens. For those dividend hunters, particularly those that are the kind that look to capitalize on special dividend announcements, I've got two that I want to share with you. One offers a dividend yield on that special dividend of more than 3% while the other tops out near 16%... I bet that got your attention. Let's discuss. Ethan Allen: Furnishing Good Returns? The first of the two is from Ethan Allen , a furniture company that clearly benefited from the pandemic surge in the housing market. While the company is once again a regular quarterly dividend payer, let's remember that back in 2020 the company briefly suspended it's then quarterly dividend of $0.21 per share only to reinstate it later in the year before bumping it up to the current quarterly dividend of $0.25 per share starting with its 2021 dividend payments. What's interesting is the latest special dividend of $0.75 announced recently and set to be paid to shareholders on Aug. 31 is the second special $0.75 per share dividend the company announced this year. The first was back in April. And while Ethan Allen has made use of special dividends in the past, twice in one year is quite a standout moment. Here's the thing, while the standalone yield on the upcoming $0.75 special dividend payment is 3.2%, if we include the forthcoming quarterly dividend payments that total yield looks more like 7.5% over the coming year. McAfee: A Safe Bet? While cybersecurity and privacy services company McAfee is well positioned given the ramping frequency of ransomware and other cyber-attacks, the company is flush with cash following the recent $4 billion sale of its enterprise business to a Symphony Technology Group-led consortium. Post transaction, McAfee is a pure-play consumer focused cyber-privacy company and it's taking a page out of the 2019 NortonLifeLock playbook by declaring a $4.50 per share special dividend. When Symantec sold its Enterprise Business to Broadcom in 2019, the rebranded consumer business, NortonLifeLock, declared a $12 per share special dividend in early 2020. It's worth noting the $4.50 special dividend to be had from McAfee is in addition to its recent string of quarterly dividends that stood at $0.1150 per share with its June 2021 announcement. Given the growth prospects for the company's cybersecurity and privacy business, odds are high it will continue to pay a quarterly dividend even after its hands our $731 million to shareholders of record as of August 13 on August 27. In addition to that amount, the company also shared it will use the transaction proceeds to repay roughly $1 billion in debt, leaving it with roughly $2.25 billion. When McAfee reports its quarterly results on Aug. 10, one of the key topics will be what the management team has planned for that cash and another is whether it plans to boost its quarterly dividend? In my opinion that cash war chest plus a business that is benefiting from the cybersecurity backdrop, a market that I expect to simply explode higher as 5G enables the IoT market, means the company could easily support a modest bump in its quarterly dividend. But even if it doesn't the combined special dividend and continuation of the current $0.1150 per share per quarter dividend offers dividend hunters a total yield opportunity of more than 17%. And the Winner Is... The clear yield winner between these two special dividend opportunities is with McAfee shares. I also have my concerns over how much longer and stronger the demand for furniture can be given the strength we saw in the second half of 2020 and the first half of 2021. Cyber attacks on the other hand will exploit the expanding connected device market as well as other vulnerabilities, which is something we saw quite a bit of earlier this year. Ethan Allen declares special cash dividend of $0.75/share ($23.61 minus $0.12): The special cash dividend has been declared to shareholders of record as of Aug. 17, payable on Aug. 31. For the folks that want to take advantage of the ETH special dividend, be sure to be a record holder before August 17. Those looking to tap into that special dividend payment from McAfee, you need to be a registered holder before August 13. (NLOK and AVGO are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)

Sofas Vs. Cyber Safety: Which Has Better Dividend Potential?

Here we look at furniture company Ethan Allen, which benefited from the pandemic, and cybersecurity name McAfee, which could profit from recent big hack attacks.

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