Dividend.com has added a retail giant to the Best Dividend Stocks List and removed a super-regional utility company from the list.
Retail has always been a cut-throat industry to do business in. And it’s only getting worse now that online shopping and e-commerce have taken hold in a big way. A variety of once-proud retailers, stores and shopping malls have continued to struggle under the weight of nimbler online rivals. But for the traditional retailers who get those bricks & clicks right, the rewards can be great.
This is exactly the scenario for our latest Best Dividend Stocks List pick.
Our pick was once directly in the cross-hairs of larger online rivals. Revenues were declining, profits were eroding and the firm looked like it was going to be the next casualty in a long line of retail names. However, after an aggressive turnaround plan, our new pick is not only competing but winning some key battles in the retail sector. The best part is the return of profitability and increasing sales. The firm just reported its best sales data in nearly a decade.
And the trajectory of those sales has only grown bigger. New in-store customer service offerings, as well as a better online shopping experience, have turned the retailer into one of the leading plays of the omnichannel or “bricks & clicks” revolution. Meanwhile, bankruptcies of other rivals have only pushed more sales into its stores and website. All the while, boosting cash flows and its dividend payment.
At the end of the day, the story for our new pick is a positive one. Marked by a properly executed turnaround plan and plenty of opportunity.
To summarize, here are five reasons why you should own this stock:
- Booming winner from online sales – with a CAGR of nearly 18% over the last four years.
- Produced more than $40 billion in revenues last year.
- Returned more than $5 billion in excess cash to shareholders over the last five years through dividends and share buybacks.
- Thanks to increasing cash flows and a lower tax rate, our pick managed to increase its dividend by 32% last quarter.
- Healthy payout ratio of 36% and increasing yield of 2.49%.
Removal of a Utility from the Best Dividend Stocks List
It’s no secret that utility stocks and other high-yielding sectors have taken it on the chin as the Federal Reserve has raised rates. That’s just the case for our leading utility pick. Since adding shares just a few months ago, the stock produced a total return of 2.97% for our investors as a significant chunk of the gains were erased.
The firm’s overall quality hasn’t deteriorated, with cash flows, earnings growth and other similar metrics still robust. However, the current environment has created a problem as the firm is now expensive when looking at its forward P/E ratio. With its valuation well above of our DARS thresholds, its dividend uptrend score has suffered and brought down its overall DARS score. Unfortunately, that means it must be removed from our sought-after list.