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1 Dividend to Buy, 1 Dividend to Sell

In today's edition of 1 Dividend to Buy, 1 Dividend to Sell, I recommend buying Macy's  (NYSE: M  ) and selling American Eagle (NYSE: AEO  ) .

Macy's continues to be an impressively competent operator in the retail space. The company trades for attractive multiples, is shareholder-focused, and is currently benefiting from the collapse of other large department store operators. Over the long run, Macy's should continue to outperform and reward shareholders along the way.

American Eagle, on the other hand, appears only relatively strong today. The company was buoyed by an easy comparison to the year prior and still operates in a weak overall environment. With teen unemployment at 25%, American Eagle trading for high multiples, and growth modest at best, I say the price isn't right today.

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Austin Smith has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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  • Report this Comment On August 30, 2012, at 7:20 PM, aeosfool wrote:

    What? Couldn't disagree more. Macy's is benefiting from other department store failures, but department stores are still dying, people are going to department stores less and less and will go to Macy's less and less, including those that shop there now because they have little other choice now. And with a nice sized debt, they will not have the options that a company like American Eagle(AE) has had.

    AE's PE is larger, true, but their growth this year and next should be well above the PE rate. American Eagle benefits from a huge cash pile and no debt. AE has shed two businesses in the past two years that will lead to higher earnings next year even if sales are not higher. AE is leading the online trend..its online sales are growing rapidly. It is franchising stores around the world which should also lead to higher earnings with little financial risk to the company. Finally, they have the best management team in retail.

    Comparing companies by primarily comparing their PE ratios is a simplistic analysis...I wish it was that simple.

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