4 Large Cap Dividend Paying Retailers With Strong Inventory Trends Reporting Earnings Next Week

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 |  Includes: GPS, M, TGT, TJX
by: Kapitall

Interested in stocks that pay dividend income but don't know where to start looking? Here are some ideas to get you started.

We started with a universe of large cap stocks paying dividend yields above 1%. We then researched the financials looking for names with strong sales trends.

Specifically, we looked for stocks with positive sales trends, with faster growth in revenue than inventory over the last year. Since inventory represents the portion of goods not yet sold, faster growth in revenue than inventory is considered an encouraging sign.

In order to be proactive during earnings season, we filtered for stocks that are expected to report earnings in the next week.

A Closer Look

5 stocks made our list. Here we look at The Gap (NYSE:GPS) in more detail. The stock is trading around $32.67, up 47% in the past 1-year. It trades with a P/E multiple of 14 times, and pays a dividend of 1.53%. The company's competitor American Eagle Outfitter (NYSE:AEO) trades with a P/E multiple of 15 times, and pays a dividend of 2.1%.

A few things to focus on when the company reports earnings on February 28th, 2013:

There is speculation that The Gap hired an advisor following interest from Japan's Fast Retailing Co. On February 7th, 2013, Gap reported that January 2013 net sales for the five-week period ended February 2, 2013 were $1.13 billion versus $833 million for the four-week period ended January 28, 2012. This was an 8% increase versus 4% decrease for January 2012.

Will this stellar performance continue?

The List

For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.

Do you think these stocks will outperform? Use the list below as a starting point of your analysis.

1. Gap Inc. : Operates as a specialty retailing company.

  • Market cap at $15.65B, most recent closing price at $32.64.
  • Revenue grew by 7.78% during the most recent quarter ($3,864M vs. $3,585M y/y). Inventory grew by -2.28% during the same time period ($2,269M vs. $2,322M y/y). Inventory, as a percentage of current assets, decreased from 50.99% to 46.95% during the most recent quarter (comparing 13 weeks ending 2012-10-27 to 13 weeks ending 2011-10-29).
  • Dividend yield at 1.53%.
  • The company is expected to report earnings on February 28th, 2013.

2. Macy's, Inc. (NYSE:M): Operates department stores and Internet Web sites in the United States.

  • Market cap at $15.98B, most recent closing price at $40.43.
  • Revenue grew by 3.79% during the most recent quarter ($6,075M vs. $5,853M y/y). Inventory grew by 0.7% during the same time period ($7,208M vs. $7,158M y/y). Inventory, as a percentage of current assets, decreased from 79.97% to 78.66% during the most recent quarter (comparing 13 weeks ending 2012-10-27 to 13 weeks ending 2011-10-29).
  • Dividend yield at 2%.
  • The company is expected to report earnings on February 26th, 2013.

3. Target Corp. (NYSE:TGT): Operates general merchandise stores in the United States.

  • Market cap at $40.26B, most recent closing price at $61.87.
  • Revenue grew by 3.21% during the most recent quarter ($16,929M vs. $16,402M y/y). Inventory grew by -3.61% during the same time period ($9,533M vs. $9,890M y/y). Inventory, as a percentage of current assets, decreased from 53.83% to 51.54% during the most recent quarter (comparing 13 weeks ending 2012-10-27 to 13 weeks ending 2011-10-29).
  • Dividend yield at 2.33%.
  • The company is expected to report earnings on February 27th, 2013.

4. The TJX Companies, Inc. (NYSE:TJX): Operates as an off-price apparel and home fashions retailer in the United States and internationally.

  • Market cap at $32.93B, most recent closing price at $45.15.
  • Revenue grew by 10.66% during the most recent quarter ($6,410.91M vs. $5,793.13M y/y). Inventory grew by -11.03% during the same time period ($3,297.12M vs. $3,706.02M y/y). Inventory, as a percentage of current assets, decreased from 68.4% to 57.9% during the most recent quarter (comparing 13 weeks ending 2012-10-27 to 13 weeks ending 2011-10-29).
  • Dividend yield at 1.1%.
  • The company is expected to report earnings on February 27th, 2013.

*Price data sourced from Yahoo! Finance, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: Business relationship disclosure: Kapitall is a team of analysts. This article was written by Sabina Bhatia, one of our writers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.