In this article, we discuss 10 best retail dividend stocks to buy. You can skip our detailed analysis of the retail sector and the performance of dividend stocks, and go directly to read 5 Best Retail Dividend Stocks to Buy.
The retail sector has experienced a major shift since the onset of the pandemic in 2020. It has swiftly responded to changing customer demands by increasing digital services and adjusting its operations accordingly. An increasing number of consumers now opt for the convenience and accessibility of online shopping.
According to a report by Forbes, digital commerce exceeded $1 trillion in a single year for the first time, as reported by Comscore. The last quarter contributed over $332.2 billion. It is important to note that these figures exclude revenues from the travel sector, which could potentially add several hundred billion dollars. Overall, retail sales last year increased by 7% compared to 2021, reaching a total of $4.9 trillion, as reported by National Retail Federation (NRF). This growth rate surpassed the average annual retail sales growth of 3.6% seen before the pandemic.
During the market turbulence of last year, almost all sectors were impacted, and the effects continue to be felt despite the market's recovery. The retail sector has also been affected by persistent inflation and consecutive increases in interest rates. According to Deloitte, GDP growth is projected to decrease to 0.9% in 2023 from an estimated 2% in 2022 and 5.9% in 2021. A slowing economy is likely to limit the growth of retail sales. However, a relatively strong labor market may help to sustain sales to some extent. Nevertheless, there is a notable possibility that a recession could have a significantly negative impact on retail sales. The report also mentioned that the economy would shrink if a recession occurs, and unemployment would increase. This could cause a larger-than-expected drop in consumer and business demand, leading to a decline in retail sales.
Despite the challenges posed by inflation, retail stocks performed well last year and continue to show strong performance this year as well. The S&P Retail Select Industry Index, which tracks the performance of retail stocks like Walmart Inc. (NYSE:WMT), The TJX Companies Inc. (NYSE:TJX), and Ross Stores, Inc. (NASDAQ:ROST), delivered a 6.94% return in the past 12 months. The index is up 11.58% year-to-date, as of July 19. Moreover, NRF forecasted that retail sales are expected to grow between 4% and 6% in 2023 compared to 2022, with the expected sales ranging from $5.13 trillion to $5.23 trillion.
In view of this, we have compiled a list of some of the best dividend stocks from the retail sector.
For this article, we scanned Insider Monkey’s database of 943 hedge funds as of Q1 2023 and picked companies that operate in the retail industry. These companies sell goods and services directly to consumers for personal use and operate through physical stores, online platforms, or a combination of both. From that list, we picked 10 stocks with the highest number of hedge fund investors and ranked them in ascending order of hedge funds’ sentiment towards them.
DICK'S Sporting Goods, Inc. (NYSE:DKS) is an American sporting goods retailer that operates a wide network of stores across the country. The company offers a diverse range of sports equipment, apparel, footwear, and accessories for its consumers.
In fiscal Q1 2024, DICK'S Sporting Goods, Inc. (NYSE:DKS) reported revenue of $2.84 billion, which showed a 5.2% growth from the same period last year. At the end of April, it had over $1.6 billion available in cash and cash equivalents. The company's comparable store sales also saw a 3.4% year-over-year growth.
DICK'S Sporting Goods, Inc. (NYSE:DKS) currently pays a quarterly dividend of $1.00 per share, having raised it by 105.1% in March this year. This was the company's eighth consecutive year of dividend growth. Not only did the company grow its payouts, but it also distributed nearly $105 million to shareholders in dividends in its most recent quarter. With a dividend yield of 2.96% as of July 19, DKS is one of the best dividend stocks on our list. It can be added to dividend portfolios alongside Walmart Inc. (NYSE:WMT), The TJX Companies Inc. (NYSE:TJX), and Ross Stores, Inc. (NASDAQ:ROST).
At the end of Q1 2023, 43 hedge funds in Insider Monkey's database reported having stakes in DICK'S Sporting Goods, Inc. (NYSE:DKS), up from 40 in the previous quarter. These stakes have a collective value of over $1.78 billion.
The Kroger Co. (NYSE:KR) is an Ohio-based retail company that is primarily focused on the sale of groceries and related products. The company is one of the best dividend stocks from the retail sector as it has raised its payouts for 17 years in a row. It currently offers a quarterly dividend of $0.29 per share for a dividend yield of 2.47%, as o July 19.
The Kroger Co. (NYSE:KR) announced its first quarter 2023 earnings on June 15. The company's revenue for the quarter grew by 1.3% on a year-over-year basis to $45.1 billion. Year-to-date its operating cash flow came in at $2.8 billion, growing from $1.1 billion in the prior-year period. For Fy23, it expects its adjusted free cash flow between $2.5 billion to $2.7 billion.
According to Insider Monkey's database of Q1 2023, 43 hedge funds owned stakes in The Kroger Co. (NYSE:KR), compared with 42 a quarter earlier. These stakes have a total value of nearly $4 billion. With 50 million shares, Berkshire Hathaway was the company's leading stakeholder.
Target Corporation (NYSE:TGT) is next on our list of the best dividend stocks from the retail sector. The American retail corporation operates a vast network of physical stores across the country, as well as an online platform that enables customers to shop conveniently from their homes.
On June 15, Target Corporation (NYSE:TGT) grew its quarterly dividend by 1.9% to $1.10 per share. This increase marked the company's 52nd consecutive year of dividend growth. The stock's dividend yield on July 19 came in at 3.32%.
In the first quarter of 2023, Target Corporation (NYSE:TGT) posted revenue of $25.3 billion, representing a 0.6% increase compared to the same period the previous year. Its operating cash flow for the quarter came in at $950 million and it returned $497 million to shareholders through dividends, up from $424 million last year.
As of the close of Q1 2023, 46 hedge funds in Insider Monkey's database reported having stakes in Target Corporation (NYSE:TGT), down from 48 a quarter earlier. These stakes are collectively valued at roughly $530 million.
Madison Investments mentioned Target Corporation (NYSE:TGT) in its Q2 2023 investor letter. Here is what the firm has to say:
“Target Corporation (NYSE:TGT) stock weakened following its first quarter earnings report. While results were better than expected, with same store sales in line with expectations and a stronger gross margin resulting in a 16% earnings beat, Target highlighted softness across discretionary categories. The discretionary weakness resulted in second quarter same store sales guidance in a wide range of low single digit negative to a low single digit gain. Target’s inventory position continues to improve, and they have cost savings initiatives in place to drive margin improvement over the next few years. We continue to view Target as well positioned for long-term growth with its strong owned brand strategy and omnichannel offerings.”
Ross Stores, Inc. (NASDAQ:ROST) is an American company that operates a chain of off-price department stores. The company offers a wide selection of name-brand and designer apparel, accessories, and other merchandise at discounted prices.
Ross Stores, Inc. (NASDAQ:ROST), one of the best dividend stocks, currently pays a quarterly dividend of $0.335 per share. As of July 19, the stock has a dividend yield of 1.19%.
Ross Stores, Inc. (NASDAQ:ROST) generated $4.49 billion in revenues in the first quarter of 2023, which saw a 3.37% growth from the prior-year period. Its net earnings jumped to $371 million, from $338.4 million in the same period last year. The company's operating cash flow for the quarter also grew to over $413 million.
Ross Stores, Inc. (NASDAQ:ROST) experienced a positive hedge fund sentiment in Q1 2023, with hedge fund positions growing to 53 in Q1 2023 from 46 in the previous quarter, as shown by Insider Monkey's database. The stakes owned by these funds have a total value of over $1.32 billion.
Madison Investments mentioned Ross Stores, Inc. (NASDAQ:ROST) Q1 2023 investor letter. Here is what the firm has to say:
“The bottom five contributors for the quarter were Ross Stores, Inc. (NASDAQ:ROST), W.R. Berkley, Gartner, Glacier Bancorp, and Carlisle. Sales trends at Ross Stores remain so-so, with flattish sales compared to a year ago. The low-to-moderate income consumer has started to struggle as stimulus payments and government support initiatives from the COVID period are wearing off, and inflation is eating away at purchasing power.”
Dollar General Corporation (NYSE:DG) ranks sixth on our list of the best dividend stocks from the retail sector. The company was a part of 53 hedge fund portfolios in Q1 2023, as per Insider Monkey's database. The stakes owned by these funds collectively amounted to over $1.74 billion.
Dollar General Corporation (NYSE:DG) operates as a discount retailer in the US. The company specializes in providing a wide range of everyday consumer products at affordable prices. It currently pays a quarterly dividend of $0.59 per share and has raised its dividends consistently for the past five years. The company's shares offer a yield of 1.42%, as of July 19. In addition to DG, Walmart Inc. (NYSE:WMT), The TJX Companies Inc. (NYSE:TJX), and Ross Stores, Inc. (NASDAQ:ROST) are some other retail dividend stocks to consider.
Though Dollar General Corporation (NYSE:DG)'s revenue for Q1 2023 missed Street's estimates, it saw a 6.7% year-over-year growth at $9.3 billion. The company's operating cash flow for the quarter came in at $191 million and its operating profit came in at roughly $741 million.
