Some companies will pay dividends without adopting a formal dividend policy. Some businesses come into large amounts of cash that they want to return to shareholders without having to promise it will continue making payouts in the future. This can happen if a company sells a valuable asset and books a tidy profit. Similarly, if a business makes a large amount of profit one year but it doesn’t expect that to repeat going forward then it may pay a dividend without adopting a policy.  

There are two primary ways of making a one-off distribution to shareholders. The first is what is known as a ‘special dividend’. These are one-off payments made to shareholders and often made in addition to ‘ordinary dividends’. This ensures that the one-off special payout doesn’t distort the ordinary dividend policy or raise expectations for the following year. If a special payout was combined with the ordinary one then there is a risk that shareholders will expect an even larger payout the following year, even if the driver of the special payout (such as an asset sale) doesn’t repeat.  

Special dividends are a way of making a one-off return to shareholders, which gives businesses great flexibility. Companies do not usually have a policy for special dividends but some regularly pay them on top of ordinary dividends.