Entering text into the input field will update the search result below

Is Macy's 7% Dividend Too Good To Be True?

Jul. 13, 2017 5:46 AM ETMacy's, Inc. (M)AMZN105 Comments


  • Macy's is a brand name synonymous with American retail; it's hard to imagine a future without Macy's, but I fear we may be heading in that direction.
  • Due to recent weakness in the face of e-commerce related headwinds, Macy's stock has sold off to the point that the company is yielding 7%.
  • This massive yield looks great at first, but not so much after you look at the company's post-great recession dividend cut and analyst estimates for future EPS.
  • If I felt comfortable that this dividend was safe, I would buy shares today at $21/share.  However, I fear that this dividend is likely to be cut.

I’ve made it no secret that I’m a bear on the retail industry. I’ve been in this boat for awhile now. I’ve taken steps over the last 2 years to sell off all of my retail names, except for Amazon (AMZN), which is the disruptor that is causing all of the problems for traditional retail in the first place, and some Kroger (KR) shares that I consider to be "house money" after a very successful trade a few years back. I’ve even gone as far as to say that retail/apparel names are simply un-investable in the present due to this disruption. But, even with that being said, I’d be lying if I said that Macy’s (NYSE:M) dividend yield rising above the 7% threshold didn’t catch my attention. In this piece I’ll be taking a look at this dividend, as well as Macy’s valuation, to see if this stock is worth a deep value flier, or if this will continue to be a value trap with a sucker’s yield.

With the market hovering near all-time highs and valuations generally high across the board, I find that I’m forced to look at out of favor industries for stocks with cheap valuations. This is why I continue to track the retail space, even though I’m not particularly bullish on the long-term prospects of many of the traditional brick-and-mortar players in the space. I know that there will eventually become a time when the value investor in me gets the best of my personal sentiment regarding retail. Back In January, I wrote this piece focused on Macy’s titled, “Is Macy’s 5% Dividend Worth The Risk?” My conclusion at the time was that it wasn’t. The stock has traded down ~25% since then. The 5% dividend wasn’t enough to entice me into the name, but what about 7%?

This article was written by

Nicholas Ward profile picture
Maximize your income with the world’s highest-quality dividend investments

University of Virginia, class of 2011 B.A English

Senior Investment Analyst at Wide Moat Research.

Contributor for Safe High Yield, The Dividend Kings, iREIT, and The Forbes Real Estate Investor.

I am also the former  editor-in-chief and portfolio manager at The Intelligent Dividend Investor.  

Check out my youtube channel for other investing ideas: https://www.youtube.com/channel/UCP7AhF_TqJSE7fN7CFwxKlg?view_as=subscriber

Ranked #18 overall blogger by TipRanks for 2014.

Former contributor at TheStreet.com (where I cover stocks held in Jim Cramer's Action Alert PLUS Charitable Trust Portfolio), Investing Daily, and Sure Dividend.

Former Editor-in-Chief of The Dividend Growth Club and The Income Minded Millennial.

I am a young investor focused primarily on dividend growth stocks. Seeking Alpha, and more specifically, the dividend and income community that exists here, has played a significant role in my development as a portfolio manager. I am not a professional, though I do manage my family's finances. I enjoy the process; the research, the decision making, the strategic planning...and not paying a financial adviser to do the work for me.

I've built what I believe to be a conservative, diverse, and balanced dividend growth portfolio currently consisting of ~60 positions. At the end of every month I break down the portfolio in my Nicholas Ward's Dividend Growth Portfolio Updates.

Thus far, I've been able to meet by goals from income, income growth, and capital appreciation standpoints. I use a wide variety of metrics, both fundamental and technical, when establishing fair value when doing my due diligence on an individual company. All of my methods are discussed in my work here.

I hope this work inspires debate, conversation, and education - this is why I write for Seeking Alpha, to give back to the community that has helped me so much and to hopefully contribute, in some way...even if its by posing a question, to the growth of others.

*I should note that all articles that I write here are done so for my personal informational/educational purposes only. Any purchases that I make or opinions that I express are not meant as recommendations for anyone else. Please perform your own due diligence before following my lead into or out of a position. I am not a professional. I am not a financial adviser of any sort.  I enjoy investing and the open discussion that articles on this site inspire - this is why I write, not to influence anyone else's decisions, but to enhance my own ability to make sound financial choices. That being said, I wish the best of luck to everyone. May we all meet our own financial goals.

Analyst’s Disclosure: I am/we are long AMZN, KR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.