Every woman can appreciate when her husband surprises her with jewelry from Tiffany (TIF), but what about when he splurges on Tiffany stock instead? This week, the luxury retail stock declared a 6% dividend hike, or an additional $0.34 per share. However, does this make the stock a more attractive buy at its current valuation? Let's take a closer look.
Paying it forward
The recent boost in Tiffany's quarterly dividend marks the company's 12th consecutive dividend increase in the past 11 years. Not bad for a company selling high-end products in a beaten-down economy. The stock will now pay shareholders an annual dividend of $1.36 per share.
The new payout puts the stock's dividend yield at around 1.7%. While this is a respectable yield for a retail stock, one luxury retailer has it beat. That's because shares of Coach (TPR 2.43%) now boast a dividend yield of 2%. The luxury goods seller followed Tiffany's lead this week by offering a dividend hike of its own.
On Thursday, Coach raised its quarterly dividend by more than 12% to $0.33 per share. This means Coach's new annual payout will be $1.35 per share. True, that's a penny less than what Tiffany will now pay you to own its stock each year. However, on a valuation basis, shares of Coach appear more attractively priced than Tiffany.
|
Company |
Stock Price |
Price-to-Earnings Ratio |
|---|---|---|
|
Tiffany |
$77 |
23% |
|
Coach |
$58 |
15% |
Growth has slowed in recent quarters for both of these luxury stocks. However, I think Coach has the most potential in terms of rewarding patient investors going forward. Unlike Tiffany, which has limited product appeal, Coach now sells everything from jewelry and watches to clothes, shoes, and other lifestyle products.
With Tiffany stock trading at around $77 apiece, I think investors can find better opportunities in other names like Coach. At least for now, Tiffany needs more than a dividend increase to call me a buyer.
