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The weak Black Friday sales results spooked a number of investors. Year-over-year, Black Friday sales were down 10%.
Thus, the market is banking on a disappointing Christmas for retailers. However, many shoppers appears to be spreading their shopping out, with Black Friday not carrying the same weight as it had in previous years.
Many shoppers still have savings – thanks to the rising wage growth, higher employment and cheaper gas – that they plan to spend this holiday season.
But regardless of what shoppers are doing, one thing investors can agree on is the appeal of high-yield dividend stocks. The sell-off in retail has created some enticing high-yield plays.
The average dividend yield on the S&P 500 index is still just 2.1%, but some retailers are offering yields of 4%. With that in mind, here are the top three Christmas stocks to put on your wish list:
Best Buy (NYSE: BBY)
Best Buy was one of the few retailers that was able to compete against Amazon.com (NASDAQ: AMZN) on Cyber Monday with its online sales. However, the stock has tumbled 24% in the last three months. It’s now offering a 3.1% dividend yield.
The focus for Best Buy’s turnaround has been cost cuts. It’s stripped out $1 billion from its annual costs and has revamped its online platform. It’s also started utilizing ship-from-store to help increase its efficiency.
At the end of the day, Best Buy is an electronics retailer, which is a positive. Technology is changing rapidly, and the new suite of TVs, phones and tablets will continue to drive traffic to Best Buy stores and its website.
Kohl’s (NYSE: KSS)
Kohl’s is paying out a 4% dividend yield, which is just a 45% payout of earnings. This is also the highest dividend yield ever for Kohl’s shares. Now, one of the big holdups for Kohl’s has been its shift to e-commerce. It was slow to adopt an online platform and is playing catch-up by investing heavily in e-commerce of late.
An overlooked advantage of Kohl’s is its exclusive private-label products. About 50% of these higher-margin products can only be found at Kohl’s.
Kohl’s also has some new initiatives to drive growth by increasing foot traffic to its stores. This includes the rollout of beauty products, which it’s testing in about a fifth of its stores. It’s also testing a revamped loyalty program that will be open to all shoppers – not just those that use the store branded card.
Macy’s (NYSE: M)
Macy’s not only has one of the most recognizable names in retail, but it also offers one of the highest dividends in the retail space, coming in at 4.2%. What’s more is that it’s just a 35% payout of earnings. Shares are off 46% year-to-date and down 37% in just the last three months.
Like Kohl’s, Macy’s has strength in its exclusive products, which make up about 40% of its offerings. But unlike Kohl’s, Macy’s is a true pioneer in the push to connect its website and brick-and-mortar stores to create a complete shopping experience.
And don’t forget that Macy’s owns a large part of its real estate, which can be overlooked given that its core business is selling goods. As well, owning the real estate means that it doesn’t have rental payments, which means more cash flow for dividends or to reinvest for growth.
There’s a very real shift toward online buying; however, there’s still a core group of customers that will enjoy the in-store experience. Macy’s – like Best Buy and Kohl’s – has a multi-pronged business model while offering a solid shopping experience for consumers.
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