Let's See What's in Store for Investors as These Retailers' Dividends Return

Among the sea of retail quarterly earnings reports investors are poring over, investors focusing on dividends and dividend yields may have had their ears perk up as two retailers reinstated their quarterly dividends following suspending them during the height of the pandemic: Dividend Aristocrat Ross Stores and Kohl's . But as we've seen many times before, just because a company is paying a quarterly dividend doesn't mean it's an alluring investment for dividend hunting investors. Let's put these reinstatement announcements through the wringer and determine if either or both are worth your attention. Ross Stores a Bargain? Discount retailer Ross Stores reported disappointing January quarter results as both revenue and earnings per share missed consensus expectations for the quarter as comparable-store sales fell 6%. And while hopes are building among investors for a pickup in the economy, a view that has grown stronger by President Joe Biden's comment that he now expects to have COVID-19 vaccine available such that every adult in the U.S. will have access to it by the end of May, up from the prior guidance at the end of July. For now at least, Ross Stores is taking what could be viewed as a far more conservative stance, given its guidance calling for comparable store sales for the 13 weeks ending May 1 to be down 1%-5% year-over-year. From an EPS perspective, Ross shared its view that called for its bottom line to be in the range of $0.74-0.86 vs. the $0.91 consensus, which knocked the shares back some earlier this week. The prevailing thought is companies will lap difficult comparisons in the June quarter allowing for more favorable comparisons. When it comes to Ross Stores and other retailers that have January fiscal year ends, it means the won't anniversary the real start of the pandemic on their businesses until June, the start of their August quarter. That said, the company expects to add about 60 new locations over the coming year, consisting of approximately 40 Ross Dress for Less and 20 Dd's Discounts. And Ross's board reinstated its quarterly dividend at $0.285 per share, which on an annualized basis equates to roughly a 1.0% dividend yield. I'd also point out that reinstated dividend is at the same level it was when the company suspended, unlike several other companies we've discussed that reinstated their quarterly dividend at lower level. Kohl's Beats, but Dividend Dips While Kohl's is also a retailer, its business mix is better categorized as a department store than a discount chain. Similar to Ross, Kohl's also recently announced it would reinstate its dividend alongside its January quarter results. Unlike Ross, not only beat consensus expectations but also issued forward guidance calling for revenue growth in the mid-teens and issued EPS guidance of $2.45-$2.95 that bookended the $2.67 consensus. In terms of its reinstated dividend, however, Kohl's opted to do so a much lower rate at $0.25 per share compared to its April 2020 dividend payment of $0.704 per share. Up until the pandemic, Kohl's had a rising dividend policy, but we would have to travel back to 2011 to find a quarterly dividend payment that matched the newly announced one. That $0.25 per share per quarter dividend combined with the surge in KSS shares over the last four months from a low near $21 to the recent closing price above $57 it means a yield of 1.7%. That is better than one currently available with ROST shares and modestly ahead of the 1.57% yield currently associated with the S&P 500, but it's not exactly a compelling opportunity. For investors looking for companies with a rising dividend policy, which should drive future dividend hikes, prior to the pandemic both Ross and Kohl's had an enviable track record and that makes them ones to put on your dividend radar screen at a minimum, but those looking for yield will want to pass on both especially at their current share prices.

Let's See What's in Store for Investors as These Retailers' Dividends Return

Dividend Aristocrat Ross Stores and Kohl's has suspended their dividends during the height of the pandemic. Let's see how the stack up.

Columnist Conversation

Pretty Incredible + Hard to Believe

This Weekend on Real Money

Bitcoin vs. Gold: Which Should You Invest In Now?

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.