The week started on a negative note on Monday as broader indexes such as Dow Industrials closed below 8000. Investor’s sentiment wasn’t helped by dividend cuts in the retail sector.
Macy’s (M) board of directors announced a steep cut in its quarterly dividends from 13.25 cents to 5 cents/share. Furthermore the company decided to eliminate 4% of its workforce by laying off 7000 employees. The retailer expects much lower EPS numbers for 2009 at 0.40-0.55/share, versus $1.21 that Wallstreet analysts had expected previously. The news that really showed that management expects worse things ahead, other than the dividend cut, is the reduction in capital spending by 100-150 million dollars in 2009.
Other retailers such as Wal-Mart (WMT) , Target (TGT) and Family Dollar (FDO), all of which are dividend aristocrats, fell slightly on the news. Check out my analysis of Wal-Mart (WMT), Target (TGT) and Family Dollar (FDO). Despite the fact that both retailers are expected to perform well in the current economic turbulence, I do not like the low dividend yields at the moment. I am seeing slowing dividend growth both at Wal-Mart and Family Dollar as well. Wal-Mart will be announcing its annual results and hopefully a dividend increase on its Earning Release on February 17. FDO already increased its dividends by 8% in 2009.I would be adding to my retail holdings in Family Dollar and Wal-Mart on dips below $18 and $32 respectively. I will be looking at initiating a position at Target (TGT) on dips below $21.40. The major competitor to Wal-Mart is known to be increasing its dividends at a slower pace in the single digits during tough periods such as the 2000-2002 slowdown.
If the January Barometer is correct, we will be seeing lower prices by the end of the year, so seeing lower prices in the retail stocks mentioned above won't be surprising at all.
Full Disclosure: Long WMT and FDO
Relevant Articles:
- Wal-Mart Dividend Analysis
- FDO Dividend Analysis
- Six Dividend Stocks Raising the bar
- Dividend Aristocrats List for 2009
Popular Posts
-
As part of my screening process, I look at the list of dividend champions every month. I have been doing this for a decade. I believe tha...
-
A few years ago I shared the story of one small investment of a beginner income investor I met at the beginning of my own dividend journey...
-
It is not a secret that stock prices have been rising for 8 - 9 years in a row now. This makes it easy to hold on to stocks, and believe tha...
-
I have a serious spending addiction – any time I find myself with some extra cash on hand, I end up spending it. This is particularly troubl...
-
As part of my monitoring process I review the list of dividend increases every single week. I use this exercise to check on the health of c...
-
I wanted to send in a quick note to readers about an interesting recent development. According to recent reports I have read, Amazon has she...
-
W. P. Carey Inc. (WPC) is an independent equity real estate investment trust . The firm also provides long-term sale-leaseback and build-to...
-
Aflac Incorporated (AFL), through its subsidiary, American Family Life Assurance Company of Columbus, provides supplemental health and life ...
-
McCormick & Company (MKC) engages in the manufacture, marketing, and distribution of spices, seasoning mixes, condiments, and other flav...
-
Raytheon Company (RTN) develops integrated products, services, and solutions for defense and other government markets worldwide. It operates...
