ISSC Is No Stranger to the 'Special Dividend'

While we generally discuss companies with enviable dividend yields -- that is, meaningfully higher than the 1.7% yield associated with the S&P 500 -- and companies with a penchant for increasing their annual dividend, there are times when unique opportunities arise. Included among those opportunities is a non-recurring, or special, dividend payment announced by a company that is one-time in nature and can offer investors a short-term opportunity to goose their dividend income. The latest such opportunity comes from a former Stocks Under $10 holding, avionics company Innovative Solutions & Support , which recently announced a special cash dividend in the amount of $0.65 per share, which will be paid on or about October 1 to shareholders of record as of the close of business on September 15. While not a mainstream aerospace name, the company has successfully competed against its larger rivals to capitalize on emerging aerospace market developments, such as the reduced vertical separation minima (RVSM), and it is currently seeing its proprietary ThrustSense auto-throttle being installed as standard equipment on a growing number of aircraft OEMs. So far, the company has announced wins for the Beechcraft King Air, Boeing KC-46A and the Pilatus PC-24. While the company is not a regular dividend payer, it's also not a stranger to the special dividend concept, having paid ones in September 2008 and December 2012. Based on the company's recent share price, this latest special dividend offers a yield near 9.0%, and based on the almost $23 million cash and equivalents it had exiting the June quarter, the company should have little problem paying the aggregate $12.4 million to shareholders. I'd note that based on its most-recent proxy filing, the company's executives and directors owned about 27% of the outstanding share count, roughly 4.6 million shares. Not all that unusual, but in the case of ISSC shares, it touches on one of the concerns I had with them when they were in the Stocks Under $10 Portfolio. That issue was the average age of the company's executive team and board, and at some point there would either need to be a management transition or the company would likely put itself up for sale. In that same proxy filing with the SEC, we see the youngest director on the company's board, Glenn Bressner, was listed at 59 years old, while the other four are between 64-79 years of age, including CEO & Chairman Geoff Hedrick (77 years). The CFO and regular investor contact Relland Winand was listed as 65 years old. I would argue that investors in ISSC who really know the company understand that Hedrick is the driving force of the company, and I say this having spoken with him numerous times. With the wind once again at the company's back -- which should translate into rising orders, revenue, profits and rising share price plus the demographics of the company's executive team and board -- I wouldn't be surprised if the company were to be sold before too long once the recently announced special dividend is paid. At a minimum, dividend-seeking investors have an opportunity ahead of them with ISSC shares, while those that stick around after the special dividend payout date have the potential for more one way or another.

ISSC Is No Stranger to the 'Special Dividend'

With the recently announced special dividend, this firm could be prepping for a sale.

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