Monday, August 31, 2009

Retail Cash

Here's some quick facts about my retail short list. Obviously these numbers are approximate, but it is the magnitude that matters.


dividend cash as % price to
yield of mkt cap sales

AEO 2.9% 13.4% 0.97
2.1% 12.8% 0.94
0.0% 9.2% 0.43
3.2% 15.4% 1.47
4.7% 7.5% 0.23
0.0% 6.1% 0.43
3.9% 33.0% 0.59
5.9% 18.1% 0.35
0.0% 27.8% 0.41
PLCE 0.0% 20.2% 0.57

Clearly there are companies on this list with loads of excess cash and healthy dividends. Fully one third of Cato's market value is sitting on its balance sheet in cash. Foot Locker's dividend represents a near 6% yield. It is well covered too, with nearly 20% of the company's market cap in cash. Two early favorites perhaps?

The P/S ratios show major disparities in these retailers from Barnes & Noble to Buckle. Of course BKS',net margins are less than 2%, while Buckle's are in the mid-teens.

The market has noticed, but is there value in this list?


  1. I'd be careful chasing a company for it's dividend. Klarman's Margin of Safety states that buying for the dividend is a flawed search strategy. The danger is that managers will maintain their dividend policy, even if it hurts the company, in order to avoid the inevitable dividend cut selloff. If these companies were trading at less than their cash value, that is another matter.

  2. Don't know how much of this blog you have read, but the dividend was not the "search strategy". This is a list of retailers that I find interesting for a number of reasons. As you may have noticed, there are 4 companies on the list that pay 0 dividend. Just an interesting aside. And the dividends are well covered. Klarman's book is a good read though! And I agree, it is more important to buy a dividend that is well covered as opposed to not. That said, I'm not going to ignore a solid 6% yield.

    Thanks for reading.

  3. Got it. My apologies.
    I am a new reader to answer your question. I added you to my RSS last week after I noticed you read Grant's and own DPS - two things we have in common.
    Great Blog!

  4. Thanks. The retail posting is one in a series, narrowing down the list bit by bit. A sort of sad, pathetic soap opera. Stay tuned. I'm sure they'll be something worth reading here at some point ;-)

  5. Also, I have to ask... what do you think DPS is worth? Have you read my DPS posts?

  6. I have read your DPS posts - great stuff. I think DPS is worth around $35-$40. I entered at $23 a year back after noticing Pershing Square's position. I won't be adding to the position at this point but I like it better than cash. I'll send you my back up - what is your email address?