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Instant Analysis: Macy's Boosts Share Buybacks, Will Hike Its Dividend This Summer

By Eric Volkman - Mar 2, 2016 at 4:23PM

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The veteran retailer plans to pay nearly $0.38 per share, and it's lifted its repurchase program by $1.5 billion.

What happened?
With an unhappy 2015 now behind it, Macy's (M -1.91%) is making moves to return more money to shareholders. The retailer announced on Feb. 26 that it intends to declare a dividend of just under $0.38 per share, 5% higher than the preceding distribution, for its summer payout. Additionally, Macy's has increased its share repurchase authorization by $1.5 billion.

IMAGE SOURCE: MACY'S.

The addition to the buyback program raises the company's total authorized repurchase amount to roughly $2 billion, as of this past Jan. 30. It has not set an end date for the program.

It has also not yet nailed down a record date for the increased dividend, saying only that this "is expected to be on or about" June 15. The payment date is to be July 1. At the current share price, the new amount would yield 3.5%, which tops the 2.4% average of dividend-paying stocks on the S&P 500 index.

Does it matter?
This might seem an awkward time for Macy's to raise its dividend and expand its buyback initiative, as it's coming off a fiscal year during which its per-share adjusted earnings dropped by 14%, accompanied by a 4% slide in revenue. Among the challenges it faces, rival J.C. Penney (JCPN.Q) is showing signs of revitalization after some tough years, and online commerce continues to hurt its bricks-and-mortar-centric business.

Yet although Macy's took a hit to its cash flow during 2015, it's still got plenty in the tank, at over $1.2 billion. That easily covered the dividend, and allowed room for a big chunk of those buybacks. J.C. Penney, by contrast, hasn't paid a dividend on its common stock since 2012.

So Macy's bump in its payout and the expanded share repurchase initiative should be greeted with cautious optimism from investors. The former, in particular, will provide a few more coins directly in their pockets, which is encouraging... although they'd be much happier to see the company reverse those revenue and profit declines.

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Stocks Mentioned

Macy's, Inc. Stock Quote
Macy's, Inc.
M
$17.97 (-1.91%) $0.35
J. C. Penney Company, Inc. Stock Quote
J. C. Penney Company, Inc.
JCPN.Q

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