I’ll admit it. I set foot in our local Best Buy (BBY) on 2019's Black Friday and the place was a madhouse! Is that anecdotal evidence? Sure, asserts Mike Larson, editor of Safe Money Report.
But what isn’t anecdotal is the data showing Best Buy has found success carving out a profitable retailing niche — despite the best efforts of Amazon (AMZN).
That’s why I believe a stake in this electronics and appliances retailer makes sense for your Dynamic Income Portfolio. Let’s start with the big picture: Best Buy provides the advice, guidance and expertise consumers need in today’s increasingly complex marketplace for tech gear.
Best Buy has turned its formerly struggling business around by focusing on a “unique combination of tech and touch” (as a recent investor presentation put it). It provides in-home advisors who design connected home and home theatre solutions, services tech gear through its “Geek Squad” business, and much more.
You can’t get that from Amazon. And that’s why Best Buy is doing so well these days. Just look at the details from the firm’s most recent quarterly earnings report:
• Net income in the fiscal third quarter that ended Nov. 2 climbed almost 6% to $293 million, or $1.10 per share, from $277 million, or 99 cents per share, in the year earlier period.
• Adjusted for non-core items, per-share profit beat analyst estimates by a dime.
• Revenue rose 1.8% to $9.76 billion from $9.59 billion. Plus, the gains would’ve been even better if it weren’t for the negative impact of currency fluctuations between the U.S. and Canadian dollars.
What else is worth noting? Best Buy bought back $368 million in shares during the quarter. That brought year-to-date repurchases to almost $1.1 billion.
The company also pays out 50 cents per share in quarterly dividends. That’s good for an indicated yield of 2.5% at recent prices. It has grown that dividend at an annualized rate of more than 22% in the past half-decade.
Finally, BBY shares have earned a “Buy” grade from our Weiss Ratings system for the lion’s share of the last few years. Consider it a solid play for 2020 and beyond.
(Editor's note: Last year, Mike Larson chose Starbucks (SBUX) as his Top Pick; the stock gained 37% last year and the advisor has since sold his shares.)
