Avoiding Stores to Work on Your Portfolio? Five Retails Stocks With Dividend Cred
Unless it’s Amazon (AMZN) or some fashion-flash-in-the-pan from overseas, it seems, retailing is a slow-growth business and one investors look to for steady returns and, hopefully, a nice dividend.
Five retail stocks are counted about the S&P 500 Dividend Aristocrats: Family Dollar (FDO), Lowe’s (LOW), Target (TGT), Walgreens (WAG) and Wal-Mart (WMT). They, like others on the list have raised their dividend annually for at least 25 years.
The dividend yields are, for the most part, not huge: Family Dollar 1.3%; Lowe’s 2.0%; Target 2.3%; Walgreens 3.4% and Wal-Mart 2.3%. But, as with all the aristocrats, if you’re a long-term investor, it is the rising dividend that over time delivers a fat yield. This chart shows dividend increases and the 10-year growth in dividend rates.
Payout ratios for all five seem reasonable and sustainable, at roughly 20%-to-37% of earnings paid in dividends.
Of the five, Walgreens’ PE ratio is notably low now, due in large part to setbacks in the prescription drug business. Should Walgreens regain its footing there, the current stock price and dividend yield, in hindsight, could look like a bargain. Should trouble persist, you could be stuck in a value trap.
Jeff Bailey is the editor of YCharts, which includes the just-released YCharts Pro Platinum for professional investors.
Filed under: Company Analysis