I was lucky enough to be invited to Manhattan last week to hang out with some friends. Holiday cheer was everywhere…and people were buying into it…literally swiping their credit cards right and left. So, let’s take a closer look at Kohl’s Corp. (KSS), a company I get asked about a lot right now, writes Kelly Green, editor of Dividend Digest.
Estimates tell us the average American spends around $1,000 on gifts and holiday items each Christmas. Collectively, we’re spending more and more on Christmas each and every year. This happens despite concerns about the economy and politics — and the fact that US credit card delinquencies continue to climb higher.
So, how does this put more money in our pockets as dividend investors? Well, if a company has a spectacular holiday season, it will show up in its fourth-quarter earnings numbers. And if Q4 sales are able to offset slower growth during the rest of the year, that’s the bonus whipped cream on your pumpkin spice latte.
In turn, investors will get excited and send share prices higher during the mid-January through early-March earnings season. If we want to maximize our yield, we need to get shares at the best price and that means spotting and getting ahead of the trend.
To search for potential investments, I set up my stock screener with these filters:
- GICS sector: Consumer discretionary
- Listed on a major US exchange
- Dividend yield of at least 3.5%
The result was 43 stocks and included Best Buy Co. (BBY), Macy’s Inc. (M), and Carter’s Inc. (CRI). Near the top of the list was KSS.
Shares of KSS are down 76% from their January 2022 highs. Its bargain-basement price means shares now pay a whopping 13% dividend yield. I love a double-digit yield as much as the next girl, but we would definitely be taking on more risk to collect it.
In its latest earnings release, Kohl’s missed expectations and lowered its full-year guidance for the second time this year. The company is in the midst of a turnaround plan, something we’ve seen from many companies in the past five years. During its earnings call, the company admitted that some of its earlier decisions were not the best…and it has reversed them.
Now, I think the company deserves props for owning its mistakes and changing course. But that still means the company is not as far along in the plan as expected. On top of all that, the CEO plans to step down in January. I’m not sure if that’s a good or a bad thing.
All that being said, I think KSS is an interesting speculation on the holiday season and beyond.
Recommended Action: Buy KSS.
