The ASX stock expected to deliver a special dividend next month

ASX investors on the hunt for bumper dividend payouts during next month’s profit reporting season will want to focus on the mining sector as these stocks are probably the most cash generative businesses on the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index.

What’s more, it isn’t only the mining giants like BHP Group Ltd (ASX: BHP) and Fortescue Metals Group Limited (ASX: FMG) that are well placed to reward shareholders with a cash splash.

Coal miner Whitehaven Coal Ltd (ASX: WHC) is tipped as another prime candidate that will titillate shareholders with dividend gifts next month following its quarterly production update yesterday.

Special dividend galore

The miner is likely to post its second record profit result in August and its managing director Paul Flynn promised that Whitehaven won’t sit on cash, according to the Australian Financial Review.

This suggests another bumper capital return to shareholders even as Whitehaven looks to build two coal mines over the next decade. Mr Flynn said he is very willing to use debt to fund capex, and that probably makes a lot of sense as the cost of debt is lower than the cost of equity.

Whitehaven paid two special dividends worth 18 cents a share over the last year and that’s on top of its regular handouts.

Macquarie Group Ltd (ASX: MQG) thinks the miner could declare another special dividend next month and is urging investors to buy the stock.

“WHC reiterated its dividend payout policy of 25%-50%. However, given delays for Vickery project approvals, strong free cash flow and a well-managed balance sheet, we believe there is scope for a special dividend,” said the broker.

“We have forecast a final dividend of A$0.27, which includes a $A0.12 base dividend and a A$0.15 special.”

Another special dividend candidate

But Whitehaven isn’t the only one with a track record of paying a special dividend. Diversified miner South32 Ltd (ASX: S32) is another that I think could cough up a special dividend, which would be its third since it spun-out of BHP.

While some analysts believe there’s no earnings upgrade potential for the stock, few would argue that it’s spitting out more cash from operations than it needs.

Given where interest rates are heading, I view any company that can generate a high and sustainable yield in good light.