An Obscure Conglomerate Pays 4 Times Its Stated Dividend

Yahoo Finance says the yield is 1.1% based on a stated annual dividend of $1 per share.
I know better. The yield is really 5.6% and the annual dividend is really $5.05 per share – four times what the website says.
I don’t fault Yahoo Finance; technically, it’s right. National Presto Industries’ (NYSE: NPK) stated annual dividend is $1 per share. But if you delve deeper, you find the unstated policy, which is to supplement the $1 per share annual dividend with an annual special dividend.
Because of my extensive research into special dividends, I’m familiar with National Presto and other special-dividend payers. My research hasn’t only imbued me with familiarity, it has unearthed a new opportunity – one I’ve yet seen explained elsewhere – for capturing outsized dividend income and significant share-price appreciation. The key is to trade the right special-dividend payers, like National Presto. (Click here for details on my complete research and this new trading opportunity.)
So, what makes National Presto a “right” special-dividend payer?
Its business, for one. You likely know National Presto for its iconic and eponymous pressure cookers. But National Presto is much more than pressure cookers. It has expanded to produce an array of kitchen appliances – popcorn poppers, pizza ovens, deep fryers, utensils, rice cookers, waffle makers, skillets and knife sharpeners.
That’s not all.
Fifteen years ago, National Presto diversified into two seemingly incongruous businesses: defense supplies, mostly ammunition; and absorbent products, namely adult diapers. The defense segment is actually National Presto’s largest segment, accounting for 54% of its $427.7 million revenue in 2015. The kitchen-appliance segments places second, generating 29% of 2015 revenue. Absorbent products place third at 17% of revenue.
This unusual triptych of businesses confers stability and predictability. Gross margins hover around 20% year after year; operating margins hover around 14%. National Presto annually generates a 13% return on its equity capital.
When you avoid breaking new ground, you avoid expending a lot of cash to maintain the business. Last year, National Presto recorded only $6.5 million in capital expenditures.
Given its business stability combined with its dearth of financial applications, you should expect cash flow to run high. National Presto doesn’t disappoint. Last year, it recorded $5.73 in free cash flow per share. The year before, it recorded $8.94 per share. (Free cash flow is the cash left over after the bills are paid.)
A continual flow of cash produces a lot of liquidity. At the end of the first quarter of 2016, cash and marketable securities totaled $66.2 million. That might ring insignificant in total, but per share, it’s very significant. National Presto holds over $9 per share in cash and marketable securities, or 10% of its investment value.
National Presto’s ability to continually generate high cash flow enables it to supplement its stated dividend with a generous variable special dividend. That special dividend has been as high as six times the stated $1 per share dividend.
National Presto adjusts the special dividend to reflect management’s outlook. The latest special dividend, paid this past February, bestowed 33% more cash than the previous year’s special dividend. Management views the outlook favorably.
Investors also view the outlook favorably. Since trading ex-dividend Feb. 26, National Presto shares have appreciated 11%. In fact, they’ve appreciated above the high before the shares traded ex-dividend.
But as I noted, the right special dividend offers a trading opportunity. Indeed, investors who knew how to trade on National Presto’s special dividend could have realized either a 175% equivalent annualized return or a 135% equivalent annualized return by employing one of two proven trading strategies my research uncovered.
To learn more about how to profitably trade the right special dividends, like National Presto’s, click here. You’ll discover that the right special dividends can generate up to 60% in one-time payouts and triple-digit equivalent annualized returns.