Please ensure Javascript is enabled for purposes of website accessibility

Kohl's Shares Fall as Investors Fear a Dividend Cut Is Coming

By John Rosevear - Mar 31, 2020 at 2:28PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Kohl's hasn't yet cut its fat dividend, but it said it might.

What happened

Shares of Kohl's (KSS 1.72%) were down on Tuesday, after the company said it has furloughed its store employees and taken other actions to conserve cash through coronavirus pandemic -- including "evaluating" the future of its high-yielding dividend. 

As of 2 p.m. EDT, Kohl's shares were trading down about 5.6% from Monday's closing price.

So what

In a late-afternoon press release on Monday, Kohl's said its brick-and-mortar stores will remain closed indefinitely due to the coronavirus pandemic, and announced a series of actions to conserve cash until it can reopen. Those include:

  • Furloughing all retail employees, as well as some employees of its corporate office. Kohl's will continue to provide healthcare benefits to furloughed employees who have them. CEO Michelle Gass will also forgo her salary for the time being.
  • Cutting capital expenditure plans by $500 million and working to reduce other ongoing costs (such as marketing and technology-related costs) as much as possible.
  • Suspending share repurchases. 
  • "Evaluating" its dividend program.

The company also said that it will fully draw down its $1 billion revolving credit line. 

A Kohl's sign on the outside of a store.

Image source: Kohl's.

But it's probably that last bullet point -- the warning that a dividend cut may be coming -- that has investors concerned today. With the steep decline in Kohl's share price over the last several months, its dividend yield has risen to a whopping 17.6%. That's almost certainly too high to sustain for much longer.

Now what

Kohl's said its online store remains open, and starting on April 2, customers will be able to pick up online orders at local stores. But the company, which withdrew its prior 2020 guidance on March 19, hasn't yet said when it'll be able to offer an outlook for the rest of the year. 

John Rosevear has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Kohl's Corporation Stock Quote
Kohl's Corporation
KSS
$33.18 (1.72%) $0.56

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/15/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.