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With the Fourth of July holiday in the rear-view mirror and warm weather stretching out in front of us, summer is officially in full swing. This is a highly profitable time of year for a select group of retailers and consumer-facing businesses.
These three summer stocks could represent good buying opportunities now that summer is upon us.
Summer Stocks: Cabela’s (NYSE: CAB)
Cabela’s is a retailer that offers a wide range of outdoor-related products, including fishing, hunting and sports merchandise.
Retailers struggled to start the year from the unseasonable weather across many parts of the U.S., but the pent-up demand is giving Cabela’s accelerating momentum in 2016.
Last quarter, Cabela notched 4.5% sales growth, thanks to 7.6% growth from retail store sales. Cabela’s performance this year is notable in light of the major difficulties facing the retail industry more broadly, including the threat of Amazon.com (NASDAQ: AMZN) and other Internet-based retailers.
Cabela’s popular CLUB membership program is helping boost sales. Last quarter, Cabela’s saw 7% growth in active CLUB credit card accounts. In addition, Cabela’s is also cutting costs, the result of a restructuring program launched last year. Because of these factors, Cabela’s adjusted profit increased 7% last quarter.
Cabela’s is off to a good start to the fiscal year. The stock does not pay a dividend, but for investors who prefer income, the following two stocks pay dividend yields that trounce the S&P average yield.
Summer Stocks: Six Flags (NYSE: SIX)
Six Flags is the world’s largest regional theme-park company with $1.3 billion in annual revenue and 18 parks across North America.
Labor and real estate markets are firming, which is a tailwind for theme park operators like Six Flags. But Six Flags is also benefiting from a shift in consumer spending habits. Americans are now using more of their discretionary income on experiences rather than hard goods.
This is providing a strong boost to Six Flags. The company is capitalizing on the trend by investing in new attractions and popular rewards programs. Six Flags racked up a record first quarter. Its revenue soared 36%, while earnings before interest, taxes, depreciation and amortization (EBITDA) jumped 39%, year over year.
Six Flags shares are up 23% in the past one year, trouncing the S&P 500 in that time. Plus, the stock pays a hefty 4% dividend. Six Flags also recently expanded its share buyback program by $500 million. For an even higher yield, investors can look to one of Six Flags’ competitors. . . .
Summer Stocks: Cedar Fair (NYSE: FUN)
Cedar Fair owns and operates 11 amusement parks, three outdoor water parks, one indoor water park and five hotels across the U.S. and Canada.
Cedar Fair is benefiting from the same economic tailwinds as Six Flags. The last fiscal year was its seventh in a row of record financial performance. Cedar Fair reported 4% revenue growth year-to-date through the July 4 weekend. This period encompasses 40% of Cedar Fair’s full-year revenue, so it is a good sign that this year will be another of solid growth.
Cedar Fair offers a 5.5% distribution yield, which is more than double the yield of the S&P 500. Cedar Fair sends the bulk of its cash flow to investors, because the company is organized as a partnership. This structure works well for Cedar Fair because most of its assets are real estate properties.
The Beauty of Summer Stocks
Cabela’s, Six Flags, and Cedar Fair should benefit from the steadily improving U.S. economy, as well as the tilt toward warm-weather activities.
These stocks have outperformed the S&P 500 in the past one year. All are attractive picks for growth and dividends.
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