Retail sales have been exploding online increasing in market share seemingly every year since the Internet has become mainstream. Yet, despite this stunning growth online, brick and mortar retail locations still account for more than 85% of the $2.57 trillion retail market. By any measure traditional retail locations are not dead and these brick and mortar companies remain giants in their respective sector.
Among these retail giants is Nordstrom Inc. (JWN). Known mostly for their large and fashionable retail locations, JWN currently yields 1.90% with a moderately low payout ratio of 33.8%. Having a fairly long dividend history going back several decades it is the annualized dividend growth rate for JWN that is most impressive at 19.33%. That is some serious dividend growth. On the valuation side of things JWN has a current PE of 18.2 putting it in line with the market but well below its peers.
Next in the retail space is the owner of T.J. Maxx, Marshalls, HomeGoods among other branded retail stores, The TJX Companies, Inc. (TJX). TJX currently yields 1.30% with a low payout ratio of 22.2%. Like JWN, the most striking fact for TJX is its impressive dividend history. TJX has been raising dividends every year for over 17 years and has a ten year annualized dividend growth rate of 23.34%. Another rocket ship dividend booster. The current PE of TJX is 17.8 putting it in line with the market in general. Thinking about hopping aboard this dividend booster?
Better known for its retail stores that operate under the names Victoria’s Secret and Bath & Body Works, L Brands, Inc. (LB) currently yields 2.40% with a moderate payout ratio of 43.0%. Like the companies mentioned before, LB has an impressive dividend growth history with a ten year annualized dividend growth rate of 11.61%. LB is currently trading at a 18.5 PE which is in line with the market but lower than its five year average. Could this be a relative value in the market today with continued high annualized dividend growth?
Next, is a retail outlet that’s well known for its company slogan, “Ross Dress for Less.” Ross Stores Inc. (ROST) currently yields a fairly low 1.20% yield with an equally low payout ratio of 18.9%. However, this low current yield might not matter when looking the ten year annualized dividend growth rate of 27.91%. ROST might also present itself as a relative value in the market today with a PE of 16.7 putting it well below the S&P.
Finally, in the brick and mortar retail space I would like to mention V.F. Corporation (VFC). For those who are not familiar with VFC you are more than likely familiar with their brands: The North Face, Vans, Timberland, Jansport, Eastpak, lucy, Nautica, Wrangler and Lee jeans to name a few. They also supply officially licensed apparel products for the NFL and MLB and operate retail locations under some of their brand names. VFC currently yields 1.70% with a relatively low payout ratio of 34.0% which allows it room to grow its dividend. It has raised its dividend for over 40 years and has an annualized dividend growth rate of 9.72%. VFC’s PE currently rests at 22.6 which is low relative to peers but on the high side relative to the S&P.
As you can see from all the companies mentioned the current dividend yield offered is low. However, this low current yield is tempered by the fact that the dividend growth rate has been stellar and from a valuation perspective it seems that these particular retailers are in line with the S&P or even below making them all relative bargains in this high priced market.
Are any retail stores in your portfolio? What do you think of this market sector in general? On a side note, I have not discussed Target Corp. (TGT) in this article as many blogs have covered the stock at great lengths in June and was a very popular buy for many of the dividend bloggers.
Disclosure: Long VFC