The Smartgroup Corporation Ltd (ASX: SIQ) share price has had a strong start to the week.
In late morning trade the specialist employee management services provider's shares are up 3.5% to $8.20.
Why is the Smartgroup share price storming higher?
In February the company released its half year results which revealed an 18% increase in revenue to $241.8 million, a 19% jump in EBITDA to $111.8 million, and a 22% lift in NPATA to $78 million.
This solid result strengthened the company's balance sheet and allowed the Smartgroup board to increase its final dividend by 13.5% to 21 cents per share.
This morning the company announced that in light of its strong balance sheet, the board has decided to return even more funds to shareholders in the form of a special dividend.
According to the release, the Smartgroup board has declared a fully franked special dividend of 20 cents per share. This dividend will be paid to shareholders on May 6, with a record day of April 15.
Smartgroup's managing director and CEO Deven Billimoria explained the rationale for the special dividend.
He said: "Smartgroup is pleased to announce the return of funds to shareholders, by way of a special dividend. This dividend is funded by existing cash reserves. Our debt level remains conservative and continues to provide us with the financial flexibility to fund growth options."
Should you buy shares for this dividend?
Although Smartgroup delivered a solid full year result on paper, it was actually a touch below the market's expectations.
As a result, prior to today, Smartgroup's shares had fallen hard since the release and were trading 40% below their 52-week high and within touching distance of their 52-week low.
Whilst it isn't a company that I'm a big fan of, I think its shares are trading at a fair price at present and could be worth considering if you're in search of income. Especially as this special dividend provides a yield of 2.4%, which adds nicely to its trailing fully franked 5.1% dividend.
I would choose it ahead of rivals Eclipx Group Ltd (ASX: ECX) and McMillan Shakespeare Limited (ASX: MMS).
