This educational provider is set to pay a walloping $7.01 in special dividends if you are a stockholder as of October 29, 2021.
Laureate Education, Inc. (LAUR)
From Dividend Confidential
The special-dividend declarations to start the fourth quarter have lagged the fourth-quarter 2020 start.
Then again, we are only two weeks into the quarter. I still expect the frequency and amount of cash paid per special declaration to rise as we approach 2022.
We have a stock you can buy and collect the special dividend.
And what a massive special dividend it is. The special dividend is so large it is like comparing a Panamax container ship to a dingy when we compare other dividend payments (both special and regular) to this one.
Laureate Education will pay the Panamax-sized special dividend. Specifically, it will $7.01-per-share in special dividends. The $7.01 payment generates a 40% yield on Laureate’s share price today. The special dividend will be paid after November 1 to most investors. You have until the close of trading on October 29 to buy Laureate share and collect its high-yield special dividend.
As for the company paying the special dividend, Laureate provides for-profit higher education programs and services to students through licensed universities. Laureate’s programs are provided through institutions that are both campus- and internet-based. Laureate has been delivering for-profit higher education services for the past 32 years. It has been providing higher education as a publicly traded corporation for the past four years.
Laureate had been a geographically diverse education-delivery company. It offered its services throughout North America, Asia, and North and South America. That is, until management shifted gears a couple of years ago to pursue a focused strategy.
Laureate sold its Asian and most of its South American operations. It recently sold its U.S. operations with the sale of Walden University. Laureate will focus primarily on two markets going forward: Mexico and Peru.
Why Mexico and Peru? The two countries offer superior growth potential.
Private education providers in Mexico account for 35% of the total higher-education market. The private sector in Mexico plays an indispensable role in providing higher education to the country’s young adults. Laureate helps bridge a gap between supply and demand imbalances created by a lack of capacity at public universities. Laureate owns two institutions and is a presence throughout Mexico with over 35 campuses.
As for Peru, private universities, which includes Laureate, are providing the capacity to meet growing education demand. These private universities constitute 72% of the total higher-education market. Laureate owns three institutions in Peru. The Peru business grows revenue close to 10% annually.
As for the home front, the recently closed Walden University sale proved to be a cash gully washer. The sale added $1.5 billion to the cash coffers. Laureate will use the proceeds to retire long-term debt, fund a $500-million share buyback, and pay the special dividend. Laureate will be left debt-free and cash-rich once all is said and done.
Laureate will also be left a smaller enterprise, roughly a third of its size compared to three years ago. But that’s OK. The markets that management is targeting are higher growth and higher margin.
How so? Well, for the second quarter of 2021, Laureate reported $327.6 million in revenue for the markets it retains. This is a $23.7 million, or an 8%, increase compared to the second quarter of 2020. Operating income posted at $57.7 million, compared to $29.1 million in the second quarter of 2020, a $28.6-million improvement.
Laureate’s operating results through the first six months of 2021 exceeded expectations. The strong results motivated management to increase its full-year guidance for 2021: Total 2021 revenue is expected to land between $1.025 billion and $1.065 million. Management previously guided for it to land between $1 billion and $1.04 billion Management now expects Laureate to end the year with 350,000 total enrollments. It was expecting 337,000 earlier this year.
Tax efficiency is another possible draw of Laureate’s special dividend A large percentage of the special dividend will likely be recognized as a return of capital. This means a large portion of the distribution could be tax free. (This prospect of a tax-free return is worth heeding if you are buying the shares in a retirement account, such as an IRA. If taxes are a consideration, consult your tax advisor.)
Two Important Caveats
Heed these caveats, because they matter.
One caveat centers on the dividend dates. October 6 is the record date and October 29 is the payment date. The ex-dividend date usually precedes the record date by one business day, so it would appear the ex-dividend date for Laureate’s special dividend occurred a week ago. It is not as it appears. November 1 is the ex-dividend date.
This means you have until the close of trading on October 29 (yes, the payment date) to buy Laureate Education shares and collect its high-yield special dividend. Your broker might tell you otherwise, but it is true: you have until October 29. (Do not worry about the record date.)
The second caveat centers on time. Because Laureate’s special dividend is so large relative to the share price, you can expect the Laureate special-dividend trade to be open longer than most of our trades, likely longer than a year, before we expect to reach our target-sell price. Your capital could be tied up longer than you might like.
Recommended Action
Dividend-Income Investors:
Buy Laureate Education (NASDAQ: LAUR) shares. That said, you have until the close of trading on October 29 to buy the shares to collect the $7.01-per-share special dividend and open a dividend-income trade.
Capital-Gains Investors:
WAIT until November 1, the ex-dividend date, and buy Laureate Education (NASDAQ: LAUR) shares. The best buy price for a capital-gains trade frequently occurs on the ex-dividend date.
Ian Wyatt & Stephen Mauzy, Dividend Confidential, wyattresearch.com, October 13, 2021