Negative shareholder returns

As of December 21, 2015, Macy’s (M) has generated a total return of -45.3% on a year-to-date (or YTD) basis. The significant negative return is due to a steep decline in the company’s stock price, as we saw in Part 1 of this series.

Nordstrom (JWN), Kohl’s (KSS), and Dillard’s (DDS) have generated total returns of -31.0%, -22.7%, and -47.3% on a YTD basis. JCPenney (JCP) has delivered a year-to-date return of 3.1% as of December 21. Macy’s has underperformed the S&P 500 Durables and Apparel Index and the S&P 500 Index, which delivered YTD returns of -0.1% and 0.2%, respectively, as of December 21.

Macy’s Shareholder Returns Paint a Gloomy Picture

Dividend yield

Macy’s current dividend yield as of December 21 was 3.8%, the same as Kohl’s. The current dividend yields of Nordstrom and Dillard’s as of December 21 were 12.6% and 0.4%, respectively. In 3Q15, Macy’s paid a quarterly dividend of $0.36, up 15.2% on a year-over-year basis.

Macy’s announced its decision to raise its dividend by 15% in May 2015. This marked the fifth increase in Macy’s dividend in the past four years. Over the past four years, Macy’s quarterly dividend has increased more than seven times, from $0.05 to $0.36 per share. Macy’s, Nordstrom, and Dillard’s together account for 0.1% of the iShares Russell 1000 Growth ETF (IWF).

Share repurchases

Share buybacks are another way of enhancing shareholder returns. Share buybacks reduce the share count and enhance the company’s EPS (earnings per share). In May 2015, Macy’s announced that its board increased its share repurchase authorization by $1.5 billion, bringing the total authorization to $2.1 billion.

In 3Q15, which ended October 31, 2015, Macy’s repurchased 16.7 million shares of its common stock for about $900 million. In the first three quarters of fiscal 2015, the company repurchased 30.6 million shares for $1.8 billion. As of October 31, 2015, Macy’s had $695 million of authorization remaining under its share repurchase program.

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