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10 Stocks With Special Dividend Potential

5. Patterson Companies (PDCO - Get Report) of St. Paul, Minn. distributes supplies to dental, veterinary services and rehabilitation providers in the U.S. and Canada. The stock is rated a B (Good) by TheStreet Ratings.

Patterson reported $61.8 million in net income, or 52 cents a share, for its fiscal fourth quarter ended on April 24. Earnings rose 15% from a year earlier, as the company saw revenue improvement in its technical services business, including parts and labor, software support and improved demand for artificial teeth.

The company initiated a 10-cent quarterly dividend on March 16, which would be a yield of 1.37% based on Friday's closing price of $29.12. Before initiating the dividend, Patterson was actively repurchasing shares, spending $636 million to buy back 18 million shares during fiscal 2008.

In a report describing the results as "Fang-tastic!," Bank of America Merrill Lynch analyst Robert Willoughby said his firm expects Patterson "to generate $1.1 billion in free cash flow over the next five years, net of only $125 million in capital expenditures." While the company's recent history of share buybacks and the new quarterly payout make it appear unlikely that a special dividend will be paid, stranger things have happened.

Willoughby has a "Buy" rating on the shares with a $37 twelve-month price target, which would be a 27% return from Friday's close.
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