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Special Dividend
Announcements: A
Canadian PerspectiveEvent Study Analysis Report
Authors
Christina Bakhos 10079694
Eric Crowley 100791435
Eddy Dostal 100639011
Katarzyna Gnatek 100795176
John Harvey 100787004
ast studies indicate that the initiation of a special dividend
esults in a positive effect on the price of stock for the issuing firm
round the time of the announcement. The purpose of this paper
to extend such studies to a more recent period of time while
ocusing on the Canadian stock market as a topic of interest.
BUSI 4500A
Carleton University
Submitted to Sana Mohsni
4/8/2013
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Table of Contents
1.0 Abstract ................................................................................................................................................ 3
2.0 Introduction and Motivation ............................................................................................................... 3
3.0 Literature Review ................................................................................................................................. 4
3.1 Regular Dividends .................................................................................................................... 5
3.2 Special Dividends ..................................................................................................................... 7
4.0 Key Research Question ...................................................................................................................... 12
4.1 Hypothesis ............................................................................................................................. 13
5.0Data Collection and Methodology ..................................................................................................... 13
6.0Signaling Effect ................................................................................................................................... 17
7.0 Regression Results.............................................................................................................................. 18
7.1 Capital Structure: Debt to Equity .......................................................................................... 19
7.2 Return on Assets .................................................................................................................... 21
7.3 Current Ratio .......................................................................................................................... 23
7.4 Return on Capital ................................................................................................................... 26
7.5 Two Period Analysis ............................................................................................................... 29
7.6 Market Capitalization ............................................................................................................. 30
8.0 Limitations and Considerations for Future Research
8.1 Special Dividend Data............................................................................................................ 31
8.2 Long Term Effects................................................................................................................... 31
8.3 Variables ................................................................................................................................ 32
8.4 Signaling ................................................................................................................................ 32
9.0 Conclusion .......................................................................................................................................... 33
10.0 Appendix .......................................................................................................................................... 35
11.0 Bibliography ..................................................................................................................................... 44
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1.0 Abstract
Whilst previous studies have focused on the impact of special dividend announcements
on U.S. firms, this paper will attempt to make similar observations on Canadian firms traded on
the Toronto Stock Exchange. Past literature has determined that the announcement of a special
dividend has a positive abnormal return on equity prices on the one day period. The hypothesis;
Ha: there are abnormal returns associated with Canadian special dividend announcements, was
thus accepted over the null hypothesis. The results obtained are therefore consistent with
previous studies: significant positive abnormal returns for stocks trading on the TSX occur on the
announcement date. The cumulative average abnormal returns for the Canadian firms involved in
this study were 1.75% whereas a return of 3.43% was discovered in similar studies on U.S.
firms. The positive abnormal returns do not continue past the one day period thus holding the
strong form of market efficiency hypothesis to be true. This was done by creating a window of
847 trading days prior to the announcement as an estimation period.
In order to develop an analysis as to what factor/s determine whether a firm will exhibit
abnormal return on the date of announcement, it was determined that firms with an ROA of 10 %
a year prior to the announcement exhibited significantly positive abnormal returns on the day of.
Finally, although there seemed to be a relationship between abnormal returns and firm size, the
regression results provided very little statistical significance in support for this relationship.
2.0 Introduction and Motivation
Although the focus of this study will pertain to special dividend paying firms, it is
imperative to describe and explain the importance of a regular dividend payment as an opening.
A dividend is a cash payment made to shareholders usually issued on a monthly, quarterly or
yearly basis. Quite frequently, firms which initiate dividends try to maintain the payments
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throughout the companys life. As described in a study by Dhillion (1994), initiations of
dividends and dividend increases are associated with positive market returns and strong firm
performance. Dividend initiations are usually a signal that a firm is transitioning from the growth
phase to a steady phase. Bulan (2007) stated that major characteristics of dividend initiators are
low growth rates, high profitability and high cash balances
The goal of this study is to determine whether the announcement of a special dividend
payment contributes to any abnormal return following the event. When a firm does not want to
maintain a payment schedule, it can issue a special dividend. This is different from issuing a
regular dividend as it is a onetime cash payment made to shareholders (Walter, 1956). Dividend
paying firms are notably large capitalization firms with high cash balances. Previous research
done by DeAngelo et al. (2000) revealed that abnormal returns occur in the short term upon the
announcement of a special dividend paid to shareholders. This paper will continue to examine
the special dividend announcement with respect to Canadian stocks. There is currently no major
research that documents the existence or effects of special dividend announcements for Canadian
Firms. There is also little research regarding the share price reactions of firms with different
market capitalizations. An event study analysis will be conducted using common stocks
exchanged on the Toronto Stock exchange in order to investigate the effects of special dividend
announcements. This paper will determine whether a difference in returns exists between market
capitalization and whether variables such as ROA, ROC, and D/E have any relationship with the
Canadian special dividend announcing firms.
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3.0 Literature Review
The proceeding review consists of existing literatures which analyze the impact of regular
and special dividends, with a focus on the latter. The majority of the studies reviewed came to
the conclusion that there are positive abnormal returns associated with firms that announce a
special dividend payment to shareholders. The literature also examines possible explanations for
why firms decide to pay special dividends instead of regular dividends or conduct share
repurchases. Other studies offer some possible predictive measures that investors can use to
assess the likelihood that a special dividend will occur in a firms near future, and thus profit
from the potential abnormal returns.
3.1 Regular Dividends
A firms decision to reduce its free cash flow capacity through the payment of dividends
has been notably used as a signal for a companys future performance. Although dividend
payment announcements are typically known to have positive impacts on stock price; a firm
should invest in a positive NPV project and withhold dividend payments if the firm is
experiencing a limit in free cash flow due to the dividend obligation. Otherwise, a negative
impact on price will be realized (Fairchild, 2010). Investors react more dramatically to negative
dividend changes than they do to dividend increase. This phenomenon needs to be taken into
account when deciding to decrease or cease a dividend payment (Denis & Sarin, 1994).
When managers initiate dividends, they must believe that they have sufficient long term
cash flows in order to continue to meet dividend payments. If this statement is true, dividend
changes should be related to the changes in the firms earnings. Pettit (1972) studied various
dividend changes to see if these changes were related to the previous earnings announcements; as
well as the reaction of the stock price upon the announcements. His findings suggest that a
substantial portion of the change in stock price is attributed to the announcement of the dividend.
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A stock with positive earnings that made a large dividend cut experiences price declines leading
up to the dividend announcement; then continues to decline in the months following. This differs
to a large dividend cut on a company that has had negative earnings. The performance leading up
to the cut was similar; however, after the dividend cut these firms saw their stock increase in
value in the months following (Pettit, 1972).
Although earnings are related to cash flow, they can be manipulated by various
accounting practices. Cash flow is a more predominate indicator of dividend sustainability than
earnings. As will be examined later within this study, some researchers associate dividend
announcements with a signaling hypothesis. Managers use dividends as a way to convey
information to shareholders about the future cash flows of the firm. Some shareholders may
prefer the firm to payout the excess cash flow as a dividend payment, while others would prefer
the firm to use the excess cash flow for profitable projects. Tobins Q is used as a proxy to
decipher between firms with positive investment opportunities (high Q) and firms with no
positive investment opportunities (low Q). It is assumed that investors would react more
positively to a dividend increase, special dividend or dividend initiation from a low Q firm than
they would from a high Q firm. This is because investors should prefer the high Q firm to
reinvest its cash flows into value maximizing projects rather than cash payments to shareholders.
Cash payments should be preferred by shareholders of low Q firms because these firms do not
have value maximizing projects available. Investors would be able to use the excess cash flow of
low Q firms more efficiently than the firm itself. However, no significant difference was found
for the abnormal returns associated with dividend announcements from low Q and high Q firms
(Howe, 1992). A later study conducted by David et al. (1994), found that low Q firms in fact had
different results from the high Q firms. The results showed that low Q firms actually did
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experience higher abnormal returns after announcing dividend increases than high the Q firms
did. However, they did not find any significant difference surrounding dividend decreases. It is
also found that analysts revised their EPS estimates for a firm by an average of 2.9% in the
direction of the dividend change which provides support for the information content of dividend
changes.
When considering the general characteristics of firms that decide to pay dividends, Bulan
et al. (2007) found that dividend initiators are generally large firms with relatively high
profitability, high cash balances and low growth rates. The systematic risk was observed to have
very little change before and after dividend initiation. It was found that the higher the dividend
premium, the higher the abnormal return on the announcement date. Stock prices of initiators are
also subjected to a more positive announcement effect. Since there are neither earnings nor
growth increases and systematic risk did not decline, a possible reason for the positive reaction to
dividend initiation may have been improved investor sentiment (a premium investors pay for
dividend paying stocks).
3.2 Special Dividends
The topic of signaling, which asserts that positive information about the firms future
earnings are potentially embedded within the dividend policy, has been a heavily studied topic.
However, not as much research has been dedicated to the signaling hypothesis for Canadian
special dividend paying firms. The main difference between an increase in a regular dividend
payment and a special dividend payment is that the regular dividend payment signals long term
earning growth, whereas special dividends are a one-time payment and thus exhibit short term
earnings growth. Companies initiating a regular dividend will therefore exhibit long term
earnings growth whereas those releasing a special dividend will only experience temporary
growth (Lie, 2000).
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The study conducted by DeAngelo (2000) further explores reasons why special dividends
were once a very common payment to investors but are now less common. The researchers found
that dividends can be a useful method of corporate signaling only when they send a clear
message, and that special dividends have become so common for many firms that they
essentially converged to common shares, and thus lost their unique signaling power. The study
also states that the market reacts favorably to the declaration of special dividends in general, but
that the relative increase or decrease in specials versus previous special dividends makes little
difference. The signaling quality of special dividends is quite small. Another conclusion is that
special dividends seem to decline as institutional investors become more prevalent than
individuals. Sophisticated investors can easily see that common and special dividends are merely
substitutes and prefer consistent payments. Finally, the study fails to find a relationship between
special dividends and stock repurchases; suggesting that special dividends are not being replaced
by repurchase plans. The findings in this study only further complicate the theories that
dividends have important signaling qualities; if strong signals were derived from the payment of
dividends then we would not have observed the phasing-out of special dividends. Firms that
announce a special dividend usually have stellar performance (based on return on assets) over the
previous year. It is found that firms chose to pay a special dividend when management does
believe it can sustain a permanent dividend increase or when the share price is not considered
undervalued by management. When management does not believe that their firm is undervalued,
but that their shares are possibly over-valued, they are unlikely to repurchase shares and
therefore are more likely to issue a special dividend with the excess cash. During the year before
a firm decides to pay a special dividend, it seems likely that the firm is achieving some sort of
operational success, measured by ROA (DeAngelo et al., 2000). Furthermore, Special dividends
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indicate current excess performance rather than expected improvement to long run performance.
No evidence is found that suggests further operational improvement after the announcement of
the special dividend. On average, investors cannot expect to have superior stock returns and
operational performance that precedes a special dividend to continue after the announcement.
Future studies provide the insight into firms in long term performance after the special dividend
(DeAngelo et al., 2000).
Choua, Liub, and Zantout (2009) analyzed the long-term stock performance of shares
following the payment of extraordinary and special dividends. They contest that no previous
studies use an appropriate timeline and sample size to ensure valid results. To ensure utmost
accuracy, the sample consisted of 2282 special U.S. cash dividends declared over the period
from 19262001 by NYSE, Amex and Nasdaq listed firms. The post-declaration long-term
abnormal returns are estimated by applying the Fama and French (1993) three-factor model. This
model is used with equally and value-weighted portfolio returns as well as with the ordinary- and
weighted-least-squares estimation procedures. The conclusion is that positive dividend news
relate to a statistically significant positive two-day abnormal return of 1.83%, with
approximately 59.20% of the abnormal returns being positive. Like many previous studies, they
found that in the long run there is no evidence of any stock price drift following declarations of
special U.S. cash dividends. This holds true even when the event is economically significant as
measured by the size of the special dividend, or by investors initial response to the declaration
(Fama and French, 1993).
It is important to note that equity shareholders of a firm are not the only stakeholders that
have a vested interest in a firms dividend policy. Bond holders are alsoconcerned with a firms
decisions regarding dividends. A study by Dhillon and Johnson (1994) compared the effects of
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dividend initiations, dividend increases, and dividend decreases to see how these changes affect
the price of the stock and the price of the bonds traded by the firm. Dividend initiations and
increases caused significant price increases for the corresponding stock. The firms bonds,
however, experienced negative returns that were not very significant. Evidence supporting
wealth redistribution hypothesis was found regarding the announcement of large dividend
changes. This was shown by the prices of bonds having the opposite price effects compared to
the stock prices (Dhillon & Johnson 1994).
Although some previous research supports the idea that the signaling power of dividends
has been decreasing, abnormal returns associated with special dividends are found in subsequent
studies. In a study conducted by Balachandran & Nguyen (2004), abnormal returns were
observed for firms that announced special dividends. The findings showed that the average
abnormal return from day 0 to day 1 was 3.43%. These results are significant at the 1% level
using a standardized t-test and generalized sign test. The research also looks at the effects of
corporate tax changes on special dividends. In the 13 year period analyzed, there were three
reductions in the corporate tax rate. The authors separated the results to show the four periods
with four different tax rates. The breakdown of the abnormal returns over the four periods is
3.4%, 4.7%, 3.3% and 3.5% respectively. These results are not statistically significant to show
whether changes in the corporate tax rate affect dividend returns (Balachandran & Nguyen,
2004).
An Australian study done by Balachandran, Faff, and Nguyen (2004) focused on whether
differences in abnormal returns associated with special dividend announcements existed among
industries. This study also regards whether intra-industry information is conveyed by the
announcements. The findings showed stronger significance for industrial firms than with
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financial and resource firms. This can be explained by the fact that market reaction to special
dividends is more dramatic for industrial firms.
James J. Park (2009) stated that an alternative way to view dividends is as a method of
reducing the agency costs associated with fraudulent activity. When a firms management team
uses the excess cash flows of the business in a way that harms shareholders, or if they improperly
report the financial condition of the firm to the public, investors are entitled to take legal action
against the firm in an effort to gain compensation for financial damages. However, this type of
shareholder compensation creates a circular problem, as investors are essentially suing the
business that they own, and therefore compensating themselves with funds that they already
own. Additionally, these funds will be no longer available for the firm to reinvest into profitable
projects, which further harms the investments of shareholders. This type of compensation also
has significant transaction costs, which take the form of legal fees that are charged by attorneys.
When shareholders are compensated via a legal settlement from their firm, these additional
qualities are not realized, and in fact the settlement will elicit a negative signal about the firms
management. However, the signaling impact of shareholders could improve in these situations if
management decides to take pre-emptive action to compensate investors in the form of a special
dividend instead of going to court over the issue. Doing so would allow shareholders to reduce
their transaction costs from legal fees, and would send a strong signal to the market that
management is now serious about acting in shareholders best interest and reducing agency costs
(Park, 2009).
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4.0 Key Research Question
This paper provides an analysis on the effects of special dividend announcements on the
stock price changes. The empirical evidence presented in the previous section indicates that the
announcement of a special dividend is related to a positive abnormal return on and around the
announcement date. Some studies argue that the price change is accounted for before the
announcement (Pettit, 1972). More recent studies show that there are consistent abnormal returns
associated around the day of special dividend announcements (Balachandran, Nguyen, 2004).
The consistencies of these positive abnormal returns are well documented for American firms
(DeAngelo, DeAngelo, Skinner, 2004).
After further review of the current literature, it was difficult to obtain special dividend
research regarding Canadian specific firms. One article was found regarding Australian firms,
which could help provide inference into the Canadian market. Australia and Canada have mildly
similar markets as both are heavily comprised of resource firms and operate under a similar
English common law legal system. The result from this Australian study proves that there is
sufficient evidence that the market reaction to special dividends is indeed stronger for industrial
non-financial firms and weaker for financial and resource firms (Balachandran, Faff, Nguyen,
2004).
The current lack of research for Canadian special dividend announcements is the primary
motivation for this study. There is also no current research regarding special dividend
announcements for small and medium market cap firms. These two reasons provide the
motivation for this study, which leads to the first research question. Are there positive abnormal
returns associated with the announcement of Canadian special dividend paying firms? Also, is
there a difference in abnormal returns between small, mid and large cap stocks?
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If abnormal returns are found for Canadian firms, predictive indicators will be then
chosen and studied for these firms. The literature describes that in order to pay a special
dividend; the firm usually must have high cash balances and great operating performance in the
prior year (DeAngelo, DeAngelo, Skinner, 2004). If this is the case, it should found that
Canadian special dividend paying firms abnormal returns should have some link to performance
indicators such as return on assets return on capital, debt to equity and current ratio.
4.1 Hypothesis
The primary Hypothesis is as follows:
H0: There are no abnormal returns associated with Canadian special dividend announcements.
Ha: There are abnormal returns associated with Canadian special dividend announcements.
It is expected that the share price increases during the development period. The signaling
theory provides some insight. The special dividend is a signal that the firm has ran out of good
projects to invest in, and does not believe that there is enough stable cash flows for the future to
issue a regular dividend or an increase. It is assumed that these firms have been exhausting their
good projects in the period prior to announcing the special dividend; while having good
operational performance. This should indicate positive price movements for the periods prior to
the special dividend.
5.0 Data Collection and Methodology
The initial sample for the purpose of this study was made up 147 Canadian companies
that are publicly traded on the Toronto Stock Exchange. These companies were all Canadian
listed and announced a special dividend between the years January 2005 and December 2012.
This period was chosen due to the lack of up to date special dividend research. Another reason
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for choosing a recent period is to possibly provide some insight into current market efficiency. A
filter was used to observe publicly listed companies which had voting rights, were listed as
common stock, were still in operation as of December 2012, and announced a special dividend
within the aforementioned time frame. A reason that only firms still in operation were chosen
was so that the research would provide useful information relating to stock returns when special
dividends are paid in the normal course of business, and not simply paid out as a means of
liquidating the firm. Also, firms that have since gone bankrupt may have been in severe distress
at the time of their most recent special dividend and thus investors may have reacted differently
to these types of stocks. The sample was further narrowed by eliminating all income trust
investment funds and companies that had other events around the time of the special dividend
announcement. Failure to eliminate this noise would result an increase in abnormal returns
around the event date (Seiler 2000). The events eliminated included earnings announcements,
stock splits, executive resignations, M&A activity or other significant events that would create
unrelated returns in our sample. After this was completed, the sample was reduced to 51
companies that would be used to test the markets reaction to a special dividend announcement.
In order to determine whether or not market capitalization has an impact on the abnormal
returns realized after the announcement of a special dividend, it is crucial to define the levels of
market cap for the purpose of this study. It is determined that micro cap firms are defined to have
a market cap less than $300 million (CDN), small cap firms have a market cap of $300 million to
$2 billion, mid cap firms have a market cap of $2-$10 billion, large cap firms have a market cap
of $10-$200 billion and finally, mega cap firms have a market cap greater than $200 billion
(Scottrade, 2013). Fitting the aforementioned sample size of 51 firms into such categories, the
following division of market cap was determined:
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# FirmsMicro < $300 M 22Small $300 M to $2 B 15
Mid $2-10 B 11
Large $10-200 B 3
Sum of sample size 51
There were no mega cap firms included in the sample; thus, this particular level of market
capitalization will not be analyzed within the study on Canadian firms.
The analysis will be broken down into 2 periods. The first is a development period, where the
expected return will be calculated by running a regression on each of the stocks in the sample
over a 3 year period. A single factor model will be used to estimate alpha and beta for each
observation.
Rit =1 +1Rmt + eit
This development period will end 150 days before the event date, which will be the actual
announcement of a new special dividend. The period of 150 days will be used as a quiet period
to ensure that there is no early reaction in the weeks or months before the announcement. The
alpha and beta calculations from the earlier development period will then be used to calculate the
expected return during the test period.
E(R) = * + *(E(Rm))
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These expected returns will then be compared to the actual returns around the day of the special
dividend announcement for each observation. Any abnormal returns occur prior, during or after
the announcement will be recorded. Abnormal returns in the days after the announcement would
show that an investor could potentially profit from the announcement of a special dividend.
The significance of the results by looking at the distribution of the returns will then be
tested. Any major outliers will be analyzed and potentially removed if they skew results. A t-test
will be run to test the significance of the results. This will be done by dividing the average
abnormal return for all observations by the standard error.
T-Stat =
Various significance levels such as 10%, 5% and 1% will be applied in order to test the
results. A higher significance level would increase the possibility that the null hypothesis (there
are no abnormal returns post-announcement) will be rejected, when it was in fact true.
After looking at the sample results, further tests will be done to analyse the variables that
impact the abnormal returns due to a special dividend analysis. Testing variables such as market
cap, debt to equity ratio, return on assets, return on equity, and current ratio will also be done
within this report. For a market condition test, the test period will be broken down into two
conditions. The first being all special dividends announced before March 6th 2009, whereas the
second will be the period after. These periods were chosen because the Toronto Stock Exchange
reached its lowest point on this date. This breakdown will allow us to look at the effects of
special dividend announcements in a declining stock market versus announcements during a
rising market.
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Dummy variables (D1, D2 and D3) will be used in our regression to isolate the impact of
the variables. For example, small cap stocks would use D1=1, D2=0 & D3 =0. The regression
would then show how each one specific variable would impact the abnormal returns.
Yi =1 +2D2 +3D3 + X i + ei
The significance of each output will then be tested in order to analyse if trends were
applicable to certain conditions or whether particular ratios lead to higher abnormal returns. The
various statistical tests will demonstrate if the results are statistically significant. If the results
are statistically significant, it could then be determined whether they are economically
significant.
The regressions will be run on our various variables for three different time periods. One day,
three day and 11 day time horizons will be used for our analysis.
6.0 Signaling Effect
In order to determine whether the signaling effect can be observed for the data set in this
study, the EPS was gathered for each firm for the quarter before the announcement was made
along with the most recent quarter post-announcement. The calculation of the cumulative
average for the growth of EPS over this period resulted in a growth rate of 44.83%. Looking
forward another period, the growth of EPS increased further by an average of 111.89%. These
results are consistent with previous studies that a signaling effect exists with the announcement
of a special dividend. However, it is crucial to determine whether the payment of a special
dividend for Canadian firms results in only a temporary earnings increase as previous studies
have concluded. Thus, looking beyond the six months studied for short term earnings increases,
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the second quarter after the special dividend announcement confirmed previous studies. The
average EPS growth rate during this period was -50.93%. This solidifies the fact that special
dividend announcements signal positive earnings growth; however, this is only evident within
the first two quarters post announcement. In the periods after, EPS drop significantly thereby
consistent with the fact that earnings increases following a special dividend announcement are
only temporary (please refer to Appendix B: EPS and Signaling Effect for details).
7.0 Regression Results
A single factor regression was used to determine the T-stat of the model. The results obtained for
different windows examined were as follows:
Beginning Day
Number848 820 840 820 1
Ending Day Number 848 853 850 821 851
T- Statistics 3.25758 1.55199 0.79739 0.23529 0.04539
It is therefore concluded that statistically significant abnormal returns are witnessed on the
announcement date (day=848). Using the single factor model, the null hypothesis was rejected in
favour of Ha: there are abnormal returns associated with Canadian special dividend
announcements. The cumulative average abnormal return at the end of this trading day is equal
to 1.75%. Looking to see if such a pattern can be observed for days before or after this date, it is
concluded that no statistically significant abnormal returns are observed beyond the one day
scope. Next, the report will continue to analyze certain variables to see whether significance can
be extracted from the regression results.
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7.1 Capital Structure: Debt to Equity
As mentioned previously, the signalling effect shows that the announcement of a special
dividend usually means the earnings are expected to increase within the next quarter. However,
as the pecking order model predicts, short-term variation in earnings is primarily absorbed by
debt (Fama & French, 2002). Thus, it is predicted that a higher debt to equity ratio will
negatively impact abnormal returns since investors believe that although the firm is signaling
higher future earnings, their high leverage will end up depleting such benefits before
shareholders are able to gain from it. Similarly, investors prefer that firms with high amounts of
debt use the excess cash to pay it off. Thus, releasing a special dividend may have an adverse
affect on abnormal returns for companies with high debt to equity ratios. The following
regression output shows the abnormal returns on stocks for the 5 days before and 5 days after a
special dividend announcement for firms with varying debt to equity ratios at the time of the
announcement. Stocks were grouped into percentages of 0-30.99%, 31-99.99% and 100% and up
(meaning that creditors have more money invested in the company than investors).
Debt to Equity11 Day Abnormal Return
The results below show no significance for any of the current ratio groupings over the 11-
day period. The p-values for all three categories are statistically insignificant. However,
companies which have D/E ratios of 32-100% exhibit the highest p-values and remain consistent
with the pecking order theory.
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.265595671
R Square 0.07054106Adjusted RSquare 0.018904453
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StandardError 0.102323482
Observations
Coefficients
Standard
Error t Stat P-value Lower 95% Upper 95%
Lower
95.0% Upper 95.0%
Intercept -0.0555297 0.041773387 -1.3293081 0.19210944 -0.14025006 0.029190654 -0.14025006 0.029190654
0-30.99% 0.070141412 0.047366568 1.480821066 0.147354128 -0.02592244 0.166205265 -0.02592244 0.166205265
31-99.99% 0.080626928 0.051161741 1.575922291 0.123791963 -0.02313389 0.184387749 -0.02313389 0.184387749
Debt to Equity3 Day Abnormal Return
By minimizing the abnormal return period to 3 days, the statistical significance drops
drastically in comparison to the 11 day abnormal returns. None of the p-values are significant at
the 95% level regardless of the capital structure. These insignificant results, as witnessed in the
11 day period as well, can be explained by market efficiency.
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.1624163
R Square 0.0263790Adjusted RSquare -0.0277109
StandardError 0.072121924
Observations 39
Coefficients
Standard
Error t Stat P-value
Lower
95% Upper 95%
Lower
95.0%
Upper
95.0%
Intercept 0.022149473 0.02944365 0.75226648 0.45678158-
0.0375650 0.08186396-
0.0375650 0.08186396
0-30.99% -0.00383781 0.03338596-
0.11495272 0.90912137-
0.0715476 0.06387206-
0.0715476 0.06387206
31-99.99% 0.021559372 0.036060962 0.59785903 0.55367668-
0.0515756 0.09469439-
0.0515755 0.09469439
Debt to Equity1 Day Abnormal Return
Contrary to what was expected, firms with a debt to equity ratio of 100% or more
exhibited significantly positive abnormal returns. Additionally, although D/E ratios of 31-
99.99% were not statistically significant, the p-value was relatively strong at 0.084. Potential
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reasons for this anomaly could be that the firms included in this subgroup were at an optimal
ratio and were able to meet interest payments thus allowing for excess cash payments to
investors.
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.28398041
R Square 0.08064487Adjusted RSquare 0.02956959StandardError 0.05650365
Observations 39
Coefficients
Standard
Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%Intercept 0.060039874 0.02306752 2.602788425 0.013344366 0.013256775 0.106822974 0.013256775 0.106822974
0-30.99% -0.03302591 0.026156109 -1.26264605 0.214834274 -0.08607296 0.02002114 -0.08607296 0.02002114
31-99.99% -0.05020003 0.028251827 -1.77687724 0.084039544 -0.10749739 0.007097333 -0.10749739 0.007097333
7.2 Return on Assets
By observing the ROA of a firm in the year prior to the announcement of a special
dividend, excellent performance can be used as a factor to determine significant abnormal
(DeAngelo, DeAngelo, Skinner, 2000). Companies were divided in categories of less than 5%, 5-
10%, and greater than 10% ROA in the year prior to special dividend announcement. Notably,
industry effects can definitely impact the results of such results among many other reasons.
ROA- 11 Day Abnormal Returns
Looking at the 95% level, none of the p-values are statistically significant. This can
surely be applied to the market efficiency hypothesis which states that the price of the stock
reflects all currently available information. Thus, the ROA made public to investors a year prior
to the dividend announcement has already been included in the price.
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SUMMARYOUTPUT
Regression Statistics
Multiple R 0.33985976
R Square 0.11550466Adjusted RSquare 0.06636603StandardError 0.09979182
Observations 39
Coefficients
Standard
Error t Stat P-value Lower 95% Upper 95%
Lower
95.0% Upper 95.0%
Intercept -0.03826213 0.027677272 -1.3824386 0.17535404 -0.09439424 0.01786998 -0.09439424 0.01786998
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ROA- 1 Day Abnormal Returns
Finally, it was interesting to see that having an ROA of 10% or more was statistically
significant at the 95% level with a p-value of 0.00895. Similarly, a firm with an ROA of 5-10%
also exhibits positive abnormal returns on the day around the announcement date. Thus,
excellent performance of the special dividend issuing firm in the year prior to the announcement
is a good indicator of abnormal return for the one day period post-announcement.
SUMMARY OUTPUT
Regression Statistics
Multiple R0.36019280
8
R Square0.12973885
9Adjusted RSquare
0.081391018
StandardError
0.054974296
Observations 39
Coefficients
Standard
Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 0.042135726 0.015247126 2.763519167 0.008954052 0.011213121 0.073058332 0.011213121 0.073058332
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dividend when they have a low current ratio, we would expect the market to react more
negatively than to firms who have strong current ratios. The following regression output shows
the abnormal returns on stocks for the 5 days before and 5 days after a special dividend
announcement for firms with various current ratios at the time of the announcement. Stocks were
grouped into current ratio classifications of less than 1 (meaning these firms are illiquid or
possibly insolvent), as well as between 1 and 2, and anything greater than a ratio of 2.
Current Ratio -11 day abnormal returns
Although our hypothesis seems to make sense intuitively, the results below show no
significance for any of the current ratio groupings over the 11-day period. The p-values for all
three categories are statistically insignificant.
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.205244659
R Square 0.04212537Adjusted R
Square -0.01108989StandardError 0.103875839
Observations 39
CoefficientsStandard
Error t Stat P-value Lower 95% Upper 95%Lower
95.0% Upper 95.0%
Intercept 0.022763997 0.025193591 0.903563004 0.372233936-
0.02833097 0.073858969-
0.02833097 0.073858969
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0.0328. However, this result could also include the effects of other factors in addition to having a
current ratio greater than 2. For stocks with a current ratio less than 2, the 3-day abnormal return
results were insignificant at the 95% level again.
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.251711225
R Square 0.063358541Adjusted RSquare 0.011322904StandardError 0.070205261
Observations 39
Coefficients StandardError t Stat P-value Lower 95% Upper 95% Lower95.0% Upper95.0%
Intercept 0.037779848 0.017027277 2.218783933 0.032893962 0.00324693 0.072312766 0.00324693 0.072312766
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The regression output below provides the results for each of the three ROC categories for
the abnormal returns over the 5 days before and the 5 days following the special dividend
announcement. Over this longer event horizon none of the three ROC levels proved to be
statistically significant at the 5% level, given their p-values of 0.434 or greater.
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.130836706
R Square 0.017118244Adjusted RSquare -0.0374863Standard
Error 0.10522304Observations 39
CoefficientsStandard
Error t Stat P-value Lower 95% Upper 95%Lower
95.0% Upper 95.0%
Intercept 0.018720314 0.024815036 0.754393975 0.455519401-0.03160691 0.06904754
-0.03160691 0.06904754
< 5 -0.03184848 0.04027805 -0.79071555 0.434288418-
0.11353615 0.049839191-0.11353615 0.049839191
5.0-10.0 -0.01048197 0.04152329 -0.2524359 0.802139932 -0.0946951 0.073731166 -0.0946951 0.073731166
Return on Capital - 3 day abnormal returns
The next output shows the regression results of ROC vs. stock abnormal returns for time
period between the day before the announcement, and the day following the dividend
announcement. Again, the results were insignificant at the 5% level, although the p-value is
stronger for firms with an ROC less than 5%, vs. the firms with ROCs between 5% and 10%;
this is in line with the hypothesis that firms with lower ROC performance will see more
favorable stock reactions when a dividend is announced. However, the intercept incorporates
firms with ROCs greater than 10% among other factors, and has the strongest p-value of all,
which is inconsistent with the notion that high ROC firms will not be favored to pay special
dividends. Perhaps the intercept coefficient is capturing too many other variables to pinpoint the
effect that high a high ROC has on a stocks reaction.
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SUMMARY OUTPUT
Regression StatisticsMultiple R 0.20446179
R Square 0.041804623Adjusted RSquare -0.01142845StandardError 0.071008445
Observations 39
CoefficientsStandard
Error t Stat P-value Lower 95% Upper 95%Lower
95.0%Upper
95.0%
Intercept 0.020298342 0.016746115 1.212122427 0.233361015-0.01366435 0.054261037
-0.01366435 0.054261037
< 5 0.0237694 0.027181135 0.874481485 0.387652912 -0.0313565 0.078895297 -0.0313565 0.078895297
5.0-10.0 -0.01435366 0.02802147 -0.51223792 0.611612982
-
0.07118383 0.042476516
-
0.07118383 0.042476516
Return on Capital - 1 day abnormal return
For abnormal returns on the day of the special dividend announcement there are mixed
results when regressed against ROC levels. Firms within the lowest ROC category produce a
very weak, but positive relationship with abnormal returns, while stocks with an ROC between
5% and 10% are slightly negatively correlated with abnormal returns, as given by their
coefficients. The intercept is significant at the 5% level, and shows a positive relationship of
0.03069 between ROCs greater than 10% and abnormal stock returns on the day of a special
dividend announcement.
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SUMMARY OUTPUT
Regression StatisticsMultiple R 0.260710166
R Square 0.067969791Adjusted RSquare 0.016190335StandardError 0.056891827
Observations 39
CoefficientsStandard
Error t Stat P-value Lower 95% Upper 95%Lower
95.0%Upper
95.0%
Intercept 0.03069121 0.013416954 2.287494515 0.028147903 0.003480365 0.057902054 0.003480365 0.057902054
< 5 0.011413468 0.021777472 0.524095178 0.603424439 -0.03275329 0.055580229 -0.03275329 0.055580229
5.0-10.0 -0.0276618 0.022450747 -1.23211054 0.225894877 -0.07319403 0.017870423 -0.07319403 0.017870423
7.5 Two Period Analysis
It was found that within the sample of 51 Canadian special dividend announcements,
abnormal returns were materially different for upward and downward trending markets. The
lowest point for the S&P TSX index during the financial crisis was around March 6 th, 2009, and
the market has since recovered quite significantly. Firms that announced special dividends before
this low point, essentially during the downward trend towards the bottom, experienced an
average 11-day cumulative abnormal return of -1.32%. However, announcements that were
made during the market recovery generated an average 11-day cumulative abnormal return of
+2.32%. Thus, there seems to be a strong indication that the stock market reacts quite differently
to the announcement of special dividends during falling and rising markets. The results are rather
intuitive, in that it would be expected that firms would be in a better position to pay a special
dividend during expansionary periods, and that they should conserve cash when the economy is
faltering. A regression analysis of this finding is provided below. Unfortunately the model does
not provide strong support for the theory that market trends have a significant impact on stock
price reactions to special dividend announcements.
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SUMMARY OUTPUT
Regression StatisticsMultiple R 0.171854186
R Square 0.029533861Adjusted RSquare 0.00972843StandardError 0.092756537
Observations 51
CoefficientsStandard
Error t Stat P-value Lower 95% Upper 95%Lower
95.0% Upper 95.0%
Intercept 0.023203533 0.015047097 1.542060441 0.129492957-0.00703474 0.053441807
-0.00703474 0.053441807
pre mar 6th 2009 -0.03639436 0.029803422 -1.22114704 0.227873624-
0.09628658 0.023497859-0.09628658 0.023497859
7.6 Market Capitalization
Further analysis of the data found that the average abnormal returns seemed to differ for
each different market cap size. Of the 51 firms analyzed, 25 were considered micro caps
(
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8.0 Limitations and Considerations for Further Research8.1 Special Dividend Data
One major limitation of our study is the lack of large cap stocks within our sample. As a
result we were unable to make any inferences to Canadian large cap special dividend
announcements. A potential extension is to increase our timeline to allow larger cap equities in
the study. However, there is one restraint when increasing our timeline.
8.2 Long term effects
Another limitation is that due to our recent data set we are unable to look at the long term
performance of special dividend paying firms after the special dividend announcement. This
restricted the study to only look at previous data and have little comparison to the future
fluctuations of the price in the long run; which is considered to be three years by previous
studies. An extension can be included in 2015 when the long run effects for 2012 announcement
firms information can be extracted from the market.
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.209012407
R Square 0.043686186
Adjusted R Square 0.003839777
Standard Error 0.059912596
Observations 51
ANOVA
df SS MS F Significance F
Regression 2 0.007870842 0.003935421 1.096364456 0.342302678
Residual 48 0.172296917 0.003589519
Total 50 0.18016776
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 0.001131209 0.022644833 0.049954384 0.960366034 -0.044399279 0.046661696 -0.044399279 0.046661696
Micro 0.011260476 0.025619704 0.439524065 0.662254377 -0.04025139 0.062772343 -0.04025139 0.062772343
Small 0.033334012 0.026489819 1.258370692 0.214344318 -0.019927339 0.086595362 -0.019927339 0.086595362
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8.3 Variables
In regards to the results for the firm performance variables we were unable to find strong
significance in regards to abnormal returns.
An extension to this part of the study is to perhaps use a different approach to predict
these variables affects on abnormal returns is to relate the timeframe in which these variables are
extracted and categorize them. The changes in markets were only applied to changes in the stock
price within this study; which proved to be insignificant. By selecting different sub-sampling
periods within the market ,there is a different influence each variable may have during different
stages within the markets (Chou, Liu, Zantout, 2007).
Another potential extension can be using a cross sectional logit regression (Bulan,
Subramanian, Tanlu, 2007). This would find the correlation between variables as well as
abnormal returns. If there are little to no significance between the current variables and abnormal
returns the results of the correlations between variables may reveal significant data in the
reactions of the market caused by special dividends.
A last potential extension is adding a hazard model. The hazard model estimates the
probability that a firm will initiate a dividend as a function of various firm characteristics,
relative to other firms that are at the same stage in their life-cycle (Bulan, Subramanian, Tanlu,
2007). This can help aid the assumptions on why special dividends may be released and help in
predicting future special dividend announcements.
8.4 Signalling
Some of the limitations on trying to capture the signalling effect is that each sectors
quarter earnings may give out a different signal itself which may skew the data. For example,
final quarters are historically strong quarters (Brown et al., 2012), if the special dividend is
released prior to the final quarter, the extra earnings seen in comparison to the previous quarter
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can be the normal cycle of when sales increase. Another example is that retail stores also
experience higher than average in sales through the months of November and December (Brown
et al., 2012), this is another factor that can change the results of our measure for capturing the
signal sent to the market.
9.0 Conclusion
The overall conclusion for this report is that there are abnormal returns associated with
the announcement of Canadian special dividends. These results were only significant on the
announcement day itself. This gives credence to the fact that the Canadian stock market is
strong form efficient. Economic profits cannot be realized by trading on an announcement of a
special dividend. This is because the stock price fully adjusts on the announcement date. This
study also concludes that small cap stocks experience larger abnormal returns than micro or mid-
cap stocks. With that said, there is still weak statistical results between the relationship of the
market cap size of the firm and return.
The results when analyzing our performance variables were mixed. ROA was significant
for one day returns. The debt to equity ratio showed no significant relationship with abnormal
returns. The current ratio overall gave mixed results which were inconclusive. Lastly, ROC was
found significant positive correlation with the abnormal returns.
This work allows for comparison between the Canadian market and previous studies
conducted on the U.S. market. There are many similarities between both exchanges, such as the
fact that both markets experienced significant abnormal returns on the special dividend
announcement date. Both countries have shown that the markets are very efficient since stock
prices adjust to the announcement and stabilize at a new equilibrium. Technology advancements
over the last few decades have increased the pace of information sharing. Since this study only
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looked at events after the year 2005, one would expect that news of the special dividend
announcement to quickly reach investors. Future studies could look at an earlier time period to
see if the Canadian stock market has become more efficient due to the advent of the Internet and
other media sources. Further extensions would also be to look at other explanatory variables and
study the long term effects of special dividends on firms.
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10.0 Appendix
Appendix A: Sample Set Information
Ticker Firm Name Event Date MarketCap
ROA D/E ROC
TSX:YRI Yamana Gold, Inc. 11/04/2010 (Special
Dividend Announced)
Yamana Gold, Inc. Declares
Quarterly Dividend Payable
on January 14, 2011 ;
Declares Special Dividend
Payable on November 26,
2010
8,620
3.03 7.16 3.97
TSX:VRX Valeant Pharmaceuticals International,
Inc.
11/04/2010 (Special
Dividend Announced)
Valeant Pharmaceuticals
International, Inc. DeclaresSpecial Dividend, Payable
on December 22, 2010
8,370
2.6 60.48 3.34
TSX:CG Centerra Gold Inc. 04/30/2011 (Special
Dividend Announced)
Centerra Gold Inc. Declares
Annual and Special
Dividends, Payable on May
18, 2011
4,152
14.23 15.44
TSX:HSE Husky Energy Inc. 02/05/2007 (Special
Dividend Announced)
Husky Energy Declares
Quarterly and Special
Dividend Payable on April 3,
2007
3,037
13.36 17.13 21.66
TSX:BNP Bonavista Energy Corporation 09/15/2008 (Special
Dividend Announced)
Bonavista Energy Trust
Announces Monthly Cash
Distribution and
Supplementary Distribution
Payable on October 15,
2008
2,541
5.52 52.87 7.11
TSX:BEI.UN Boardwalk Real Estate Investment Trust 08/12/2010 (Special
Dividend Announced) 2,167
4.99 5.35
TSX:RUS Russel Metals Inc. 08/06/2008 (Special
Dividend Announced)
Russel Metals Inc. Declares
Quarterly Common Share
Dividend and Supplemental
Dividend, Payable on
September 15, 2008
1,810
10.55 19.19 14.64
TSX:PEY Peyto Exploration & Development Corp 12/14/2007 (Special
Dividend Announced)
Peyto Energy Trust
Announces December 2007
Cash Distribution and
1,760
11.21 107.16 14.66
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Special Distribution, Payable
on January 15, 2008
TSX:SII Sprott Inc. 03/23/2011 (Special
Dividend Announced)
Sprott Inc. Declares Special
Annual and Fourth Quarter2011 Dividend, Payable on
April 15, 2011
1,573
na na na
TSX:SCL.A ShawCor Ltd. 05/12/2009 (Special
Dividend Announced)
ShawCor Declares Quarterly
and Special Recognition
Dividends Payable on 29
May 2009
1,525
11.12 12.15 16.05
TSX:KEY Keyera Corp. 11/04/2009 (Special
Dividend Announced)
Keyera Facilities Income
Fund Declares Regular and
Special Distribution Payableon December 15, 2009
12/21/2007 (Special
Dividend Announced)
Keyera Facilities Income
Fund Declares Special
Dividend Payable on
January 2, 2008
1,366
7.8 71.42 10.75
TSX:TFI TransForce Inc. 02/26/2007 (Special
Dividend Announced)
Transforce Income Fund
Announces Earnings Results
for the Fourth Quarter and
Full Year Ended December31, 2006 ; Declares Regular
Monthly Distribution
Payable on April 13, 2007;
Declares Special
Distribution
1,230
8.88 71.33 11.24
TSX:PD Precision Drilling Corporation 12/25/2008 (Special
Dividend Announced)
Precision Drilling Trust
Anticipates January 2009
Cash Distributions ; Declares
Special Dividend Payable on
January 15, 2009
1,144
11 16.79 13.44
TSX:BIN Progressive Waste Solutions Ltd. 10/30/2009 (Special
Dividend Announced)
IESI-BFC Ltd. Declares
Quarterly Dividend and
Special Dividend, Payable
on January 15, 2010 and
Payable on December 31,
2009, Respectively
1,141
4.03 63.29 4.75
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TSX:GMP GMP Capital Inc. 12/21/2007 (Special
Dividend Announced)
GMP Capital Trust Declares
Monthly Dividend Payable
on January 18, 2008;
Declares Special Cash
Distribution Payable on
January 18, 2008
1,060
18.45
TSX:GNV GENIVAR Inc. 12/20/2010 (Special
Dividend Announced)
GENIVAR Income Fund
Announces December 2010
and Special Distributions,
Payable on January 17, 2011
816 7.47 12.95 9.5
TSX:FRU Freehold Royalties Ltd. 11/11/2009 (Special
Dividend Announced)
Freehold Royalty Trust
Reports Earnings Results for
the Third Quarter and Nine
Months Ended September
30, 2009; Declares
November 2009
Distribution; Announces
Executive Changes; Provides
Capital Expenditure
Guidance for the Fourth
Quarter of 2009; Revised
Capital Program for the Year
2009; Approves Capital
Budget for 2010; Declares
Extra Dividend
755 4.29 76.52 5.2
TSX:XSR Sirius XM Canada Holdings Inc. 11/20/2012 (Special
Dividend Announced)
Canadian Satellite RadioHoldings Inc. Declares
Special Cash Dividends and
Quarterly Dividends Payable
on January 2, 2013 and
January 2, 2013,
Respectively
714 0.77 320.39 1.64
TSX:CMG Computer Modelling Group Ltd. 05/24/2012 (Special
Dividend Announced)
Computer Modelling Group
Ltd. Reports Audited
Consolidated Earnings
Results for the Fourth
Quarter and Full Year Ended
March 31, 2012; DeclaresQuarterly Dividend and
Special Dividend, Payable
on June 15, 2012
668 33.34 50.02
TSX:WJX Wajax Corporation 12/15/2010 (Special
Dividend Announced)
Wajax Income Fund
Announces Special Cash
Distribution, Payable on
623 6.62 37.5 10.83
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January 20, 2011; Provides
Dividend Guidance for the
Months January and
February 2011
TSX:CDL.A Corby Distilleries Limited 11/07/2012 (Special
Dividend Announced)
Corby Distilleries Limited
Reports Unaudited
Consolidated Earnings
Results for the First Quarter
Ended September 30, 2012;
Declares Quarterly Dividend
and Special Dividend,
Payable on December 14,
2012 and January 10, 2013
Respectively
500 7.84 9.02
TSX:ARF Armtec Infrastructure Inc 12/16/2009 (Special
Dividend Announced)
Armtec Infrastructure
Income Fund Declares
Special Distribution Payable
on January 15, 2010;
Declares Regular Cash
Distribution for December
2009 Payable on January 29,
2010
474 5.45 86.91 7
TSX:HRX Heroux-Devtek Inc. 11/09/2012 (Special
Dividend Announced)
Heroux-Devtek Inc.
Announces Unaudited
Consolidated Financial
Results for the SecondQuarter and Six Months
Ended September 30, 2012;
Provides Sales Guidance for
the Fiscal Year Ending
March 31, 2013; Proposes
Special Cash Dividend, to be
Payable on December 19,
2012
416 4.8 16.62 6.6
TSX:GLN Glentel Inc. 10/26/2012 (Special
Dividend Announced)
Glentel Inc. Declares Special
Dividend
355 10.77 23.8 21.06
TSX:CTU.A Le Chateau Inc. 06/05/2008 (SpecialDividend Announced)
Le Chateau Inc. Reports
Earnings Results for the First
Quarter Ended April 26,
2008; Declares Regular
Quarterly Dividend and
Special Dividend Payable on
August 19, 2008
327 16.86 27.47 21.67
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TSX:DCI DirectCash Payments Inc. 11/18/2010 (Special
Dividend Announced)
DirectCash Income Fund
Announces Special Cash
Distribution Payable on
February 28, 2011
293 10.17 42.72 12.31
TSX:FC Firm Capital Mortgage Investment
Corporation
12/18/2012 (Special
Dividend Announced)Firm Capital Mortgage
Investment Corporation
Announces Cash Dividend
for the Month of December
2012 and Estimated Special
Year-End Dividend, Payable
on January 15, 2013
231 5.87 61.68
TSX:AVF AvenEx Energy Corp. 12/16/2008 (Special
Dividend Announced)
Avenir Diversified Income
Trust Declares December
Distribution Payable on
January 15, 2009 ; Declares
Special Distribution Payable
on February 16, 2009
217 6.21 17.66 10.1
TSX:BRE Brookfield Real Estate Services Inc. 12/11/2010 (Special
Dividend Announced)
Brookfield Real Estate
Services Fund Announces
Regular and Special
Distribution Payable on
January 28, 2011
182 7.45 93.82 7.96
TSX:MPC Madison Pacific Properties Inc. 09/26/2011 (Special
Dividend Announced)
Madison Pacific PropertiesInc. Declares Special
Dividend
158 2.8 69.3 2.92
TSX:CSF The Cash Store Financial Services, Inc. 08/27/2009 (Special
Dividend Announced)
The Cash Store Financial
Services Inc. Declares
Regular and Special
Dividend, Payable on
September 24, 2009
155 21.46 2.16 25.66
TSX:PWC Pacific & Western Credit Corp. 01/25/2007 (Special
Dividend Announced)
Pacific & Western Declares
Special Dividend Payable onMarch 7, 2007
154 1.35
TSX:GCL Colabor Group Inc. 07/08/2009 (Special
Dividend Announced)
Colabor Income Fund
Announces Intention to
Convert from an Income
Trust Structure to a
Corporation ; Declares
Special Dividend, to be Paid
146 4.55 84.18 6.85
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on or Around September
15, 2009
TSX:SRF Sun-Rype Products Ltd. 02/28/2007 (Special
Dividend Announced)
Sun-rype Products Ltd.
Reports Earnings Results for
the Fourth Quarter and Full
Year Ended December 31,
2006 ; Declares Quarterly
Dividend Payable on March
15, 2007 ; Announces
Special Dividend
143 10.74 1.58 15.67
TSX:CTY Calian Technologies Ltd. 11/12/2009 (Special
Dividend Announced)
Calian Technologies Ltd.
Declares Quarterly Dividend
and Special Dividend
Payable on December 9,
2009
141 15.74 26.71
TSX:AHF Aston Hill Financial Inc. 03/11/2011 (Special
Dividend Announced)
Aston Hill Financial Inc
Announces Special Cash
Dividend, Payable on March
31, 2011
121 6.82 3.96 7.57
TSX:HPS.A Hammond Power Solutions Inc. 05/25/2009 (Special
Dividend Announced)
Hammond Power Solutions
Inc. Declares Special Cash
Dividend Payable on July 15,
2009
104 17.59 10.46 24.01
TSX:MCB McCoy Corp. 03/18/2011 (SpecialDividend Announced)
McCoy Corp. Reports
Earnings Results for the
Fourth Quarter and Full
Year Ended December 31,
2010; Provides Earnings
Guidance for the Full Year
of 2011; Declares Special
Dividend Payable on April
11, 2011; Announces
Impairment Charge for the
Fourth Quarter of 2010
104 7.13 10.63 9.03
TSX:GDL Goodfellow Inc. 04/13/2010 (Special
Dividend Announced)Goodfellow Declares Special
Dividend, Payable on May
14, 2010
100 6.71 21.39 8.29
TSX:JOV Jovian Capital Corporation 11/19/2012 (Special
Dividend Announced)
Jovian Capital Corporation
Announces Special Cash
Dividend, Payable on
83 -5.11 5.04 -7.13
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December 13, 2012
TSX:CXS Counsel Corporation 11/12/2012 (Special
Dividend Announced)
Counsel Corporation
Reports Unaudited
Consolidated Earnings
Results for the Third
Quarter and Nine Months
Ended September 30, 2012;
Declares Special Dividend,
Payable on January 1, 2013
81 18.39 31.12
TSX:RYL Royal Host Inc. 02/28/2009 (Special
Dividend Announced)
Royal Host REIT Announces
Final 2008 Special
Distribution, Payable on
April 30, 2009
54 1.93 662.78 2.09
TSX:CXA.B Consolidated HCI Holdings Corporation 02/14/2012 (SpecialDividend Announced)
Consolidated HCI Holdings
Corp. Announces Special
Dividend, Payable on March
5, 2012
53 0.92 10.56 0.98
TSX:GDS Gendis Inc. 01/10/2012 (Special
Dividend Announced)
Gendis Inc. Declares Special
Dividend, Payable on
January 31, 2012
52 -8.04 18.61 -8.5
TSX:AM Automodular Corp. 11/06/2012 (Special
Dividend Announced)
Automodular Corp.Announces Earnings Results
for the Third Quarter and
Nine Months September 30,
2012; Declares Quarterly
Dividend and Special
Dividend, Payable
December 4, 2012
40 26.78 0.08 37.66
TSX:PIC.A Premium Income Corporation 01/26/2009 (Special
Dividend Announced)
Premium Income Corp.
Reports Earnings Results for
the Year Ended October 31,
2008 ; Declares Ordinaryand Special Distributions
36 -9.98 362.62 -10.34
TSX:GDI General Donlee Canada Inc 03/09/2009 (Special
Dividend Announced)
General Donlee Income
Fund Declares February
Cash Distribution and
Special Cash Distribution for
29 10.78 1164.51 12.15
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the Year 2008 Payable on
March 31, 2009
TSX:TVK TerraVest Capital Inc. 12/21/2011 (Special
Dividend Announced)
TerraVest Income Fund
Declares Second SpecialDistribution Payable on
January 11, 2012
25 4.73 19.96 5.66
TSX:LCS Brompton Lifeco Split Corp. 03/21/2011 (Special
Dividend Announced)
Brompton Lifeco Split Corp.
Suspends A Class
Distribution
10 1.56 225.2 1.6
TSX:DOM.UN Dominion Citrus Limited 12/20/2011 (Special
Dividend Announced)
Dominion Citrus Limited
Announces Special
Distribution Payable on
January 16, 2012;Announces Board of
Trustees Appointments
6 5.18 15.85
TSX:WTE Westshore Terminals Investment
Corporation
03/19/2008 (Special
Dividend Announced)
Westshore Terminals
Income Fund Declares
Quarterly Cash Dividend
and Special Dividend
Payable on or Before April
15, 2008
1 6.37 7.23
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Appendix B: Earnings per Share and Signaling Effect
Earnings Per Share Growth
Ticker (-1 quarter) announcement (+1 Quart) (+2 Quarts) t=0 t=1 t=2
TSX:YRI0.17 0.2 0.26 0.16 17.65% 30.00% -38.46%
TSX:VRX-0.1 0.02 0.19 0.13 -120.00% 850.00% -31.58%
TSX:CG0.58 0.3 0.35 0.34 -48.28% 16.67% -2.86%
TSX:HSE0.64 0.77 0.85 0.91 20.31% 10.39% 7.06%
TSX:BNP1.77 1.09 0.28 0.01 -38.42% -74.31% -96.43%
TSX:BEI.UN1.02 15.1 4.12 3.54 1380.39% -72.72% -14.08%
TSX:RUS1.45 0.48 -0.92 -0.41 -66.90% -291.67% -55.43%
TSX:PEY0.54 0.37 0.37 0.69 -31.48% 0.00% 86.49%
TSX:SII0.07 0.04 0.06 0.03 -42.86% 50.00% -50.00%
TSX:SCL.A0.45 0.49 0.48 0.44 8.89% -2.04% -8.33%
TSX:KEY0.55 0.6 0.42 0.54 9.09% -30.00% 28.57%
TSX:TFI0.64 0.24 0.31 0.33 -62.50% 29.17% 6.45%
TSX:PD0.68 0.3 0.23 0.26 -55.88% -23.33% 13.04%
TSX:BIN0.2 0.11 0.18 0.21 -45.00% 63.64% 16.67%
TSX:GMP0.38 0.33 0.25 0.11 -13.16% -24.24% -56.00%
TSX:GNV-0.06 0.62 0.38 0.54 -1133.33% -38.71% 42.11%
TSX:FRU0.16 0.29 0.2 0.23 81.25% -31.03% 15.00%
TSX:XSR0.01 0.02 0.89 0.02 100.00% 4350.00% -97.75%
TSX:CMG0.18 0.12 0.16 0.2 -33.33% 33.33% 25.00%
TSX:WJX1.18 0.95 0.77 0.99 -19.49% -18.95% 28.57%
TSX:CDL.A0.16 0.17 0.25 0.32 6.25% 47.06% 28.00%
TSX:ARF-0.52 0.37 0.43 0.29 -171.15% 16.22% -32.56%
TSX:HRX0.21 3.68 0.15 0.22 1652.38% -95.92% 46.67%
TSX:GLN0.01 0.01 0.1 0.08 0.00% 900.00% -20.00%
TSX:CTU.A0.25 0.39 0.49 0.23 56.00% 25.64% -53.06%
TSX:DCI-0.61 0.25 0.28 0.32 -140.98% 12.00% 14.29%
TSX:FC0.26 0.26 0.27 0.24 0.00% 3.85% -11.11%
TSX:AVF-2.28 -0.18 0.01 -0.2 -92.11% -105.56% -2100.00%
TSX:BRE0.04 0.52 0.85 -0.34 1200.00% 63.46% -140.00%
TSX:MPC0.08 0.1 0.06 0.03 25.00% -40.00% -50.00%
TSX:CSF0.07 0.33 0.13 0.32 371.43% -60.61% 146.15%
TSX:PWC0.08 0.02 0.01 0.04 -75.00% -50.00% 300.00%
TSX:GCL0.12 0.3 0.53 0.1 150.00% 76.67% -81.13%
TSX:SRF0.11 0.23 0.11 -0.02 109.09% -52.17% -118.18%
TSX:CTY0.58 0.45 0.44 0.4 -22.41% -2.22% -9.09%
TSX:AHF0.01 0.01 0.02 0 0.00% 100.00% -100.00%
TSX:HPS.A0.36 0.04 0.01 0.04 -88.89% -75.00% 300.00%
TSX:MCB0.07 0.12 0.11 0.14 71.43% -8.33% 27.27%
TSX:GDL0.24 0.22 0.45 0.57 -8.33% 104.55% 26.67%
TSX:JOV0.1 0.11 0.1 0.1 10.00% -9.09% 0.00%
TSX:CXS0.56 0.68 0.65 0.62 21.43% -4.41% -4.62%
TSX:RYL-4.12 -0.07 0.06 -0.1 -98.30% -185.71% -266.67%
TSX:CXA.B0.04 0.01 0.01 0.03 -75.00% 0.00% 200.00%
TSX:GDS0.09 -0.02 -0.24 0.21 -122.22% 1100.00% -187.50%
TSX:AM0.15 0.25 0.28 0.2 66.67% 12.00% -28.57%
TSX:PIC.A-0.39 -0.04 0.1 -0.04 -89.74% -350.00% -140.00%
TSX:GDI0.18 0.02 0.1 0.02 -88.89% 400.00% -80.00%
TSX:TVK-0.19 0.14 0.08 0.12 -173.68% -42.86% 50.00%
TSX:LCS0.01 -0.02 0.14 -0.19 -300.00% -800.00% -235.71%
TSX:DOM.UN-0.04 -0.04 0.01 0.02 0.00% -125.00% 100.00%
TSX:WTE0.15 0.43 0.54 0.56 186.67% 25.58% 3.70%
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