The first earnings season of 2022 is essentially behind us now, but that doesn't mean companies are slacking on shareholder payout hikes. In recent days, three notable companies in the retail sector declared new dividend increases: Home Depot (HD -0.31%), Best Buy (BBY 1.09%), and Macy's (M -2.03%). Let's take a look at all three.
1. Home Depot
A strong and resilient U.S. housing market continues to juice the results of Home Depot. Thankfully for dividend-stock fans, the do-it-yourself retailer is passing along some of its recent gains to shareholders in the form of a double-digit (15%) hike in its quarterly dividend to $1.90 per share.
Home Depot has plenty of tailwinds behind it, not least of which is the power of the housing market. It also did well in the thick of the coronavirus pandemic, as many current homeowners spent more than they might have otherwise on making their domiciles as comfortable as possible during lockdowns and work-from-home stretches.
We're heading into a more uncertain period, as the pandemic seems to be receding and supply chain issues affect the inventory and thus, the fundamentals of big retailers.
In its most recent earnings report, Home Depot proffered guidance indicating that both revenue and profitability will only crawl upwards this year, compared to 2021. That's unhappy news to the shareholders who happily witnessed their company's 14% boost in annual sales last year and the powerful 27% rise in headline net profit.
Image source: Getty Images.
Discouraged investors should remember, though, that the housing market is still strong and should remain so, as long as interest rates (and therefore mortgages) remain relatively low. Home Depot's recent share-price weakness, then, might provide an opportunity to snap up its shares at a discount.
The company's remodeled dividend will be handed out on March 24 to investors of record as of March 10. At the most recent closing share price, the new-payout's yield would be just under 2.4%.
2. Best Buy
Another retailer that did well during the pandemic and is now passing along the benefits of enhanced performance is Best Buy. Earlier this month, the electronics slinger declared that its upcoming quarterly payout would be $0.88 per share, a rich 26% higher than its predecessor.
Best Buy could have written the book on how to survive and, at times, thrive during a scary worldwide pandemic. The company's nimble management successfully pushed curbside pickup and other alternate means of purchase in the thick of the coronavirus rampage. As a result, its fundamentals held up very well, compared to those of many other retailers.
It's clearly in a period of adjustment now, exacerbated by those inescapable supply chain difficulties. Sales actually notched a slight decline in the company's recently reported Q4 -- a crucial period for any retailer, as it falls during the holiday season. Net profit, meanwhile, recorded a steeper fall.
But for patient investors, Best Buy is forecasting a return to sales records by 2025. Management predicts (realistically, in my view) that tech products will continue to be an ever-more crucial part of all our lives. After all, few of us want to be stuck with a slow smartphone or a gaming console that can't handle the latest and coolest titles.
That chunky dividend raise is a smart way of encouraging investors to hang on. The increased payout will be dispensed on April 14 to stockholders of record as of March 24. Its yield would be a comparatively generous 3.4%.
3. Macy's
Of our three retail companies, Macy's is the one that has faced the hardest struggles in the recent past. But this sturdy old veteran of the business isn't letting that deter it from lifting its quarterly dividend -- which, by the way, it brought back last year after suspending it in March 2020.
The company's next shareholder payout will be just under $0.16 per share, a roughly 5% increase over the previous disbursement. And sweetening the cake for investors, Macy's also launched a $2 billion share-repurchase program, which is four times that of its preceding buyback initiative.
The obvious confidence these moves indicate derives from, yes, vastly improved results as we (hopefully) move past the worst of the pandemic.
Macy's was already reeling before the coronavirus from the retail apocalypse. But in the depths of its struggles, the company launched its Polaris strategy, a multipronged attempt at improvement. This was to be effected through measures such as the pushing of digital sales, enhanced customer engagement, and cost-cutting. And by gum, it seems to be working.
That crucial holiday-infused fourth quarter was quite the success for the company, with comparable sales on an owned (as opposed to owned-plus-licensed) basis rising a fat 28% and even topping the pre-pandemic fourth quarter of 2019 (by nearly 7%). This powered both revenue and, especially, profitability above the consensus analyst estimates. The company's 2022 guidance also exceeded prognosticator expectations.
Things are looking up for this once quite-troubled retailer. The raised dividend, a potent symbol of what shareholders will hope to be a lasting recovery, is to be doled out on April 1 to investors of record as of March 15. It would yield 2.9% at the current stock price.
