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Kohl’s Dividend Yield Has Outperformed Broader Indexes

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Kohl’s net sales and EPS growth

Kohl’s (KSS) net sales rose 1% in 2015 before slumping 3% in 2016. The decline was due to weak comparable sales. Gross margin fell 3% in 2016 after flat growth in 2015. Cost of sales had risen in 2015 before declining in 2016. Operating income fell 8% and 24%, respectively, in 2015 and 2016 due to higher operating costs. Overall, the company’s EPS fell 18.4% and 10%, respectively, in 2015 and 2016. Its interest expense fell during the period offset by a debt extinguishment cost in 2015. Share buybacks enhanced the EPS numbers.

Net sales fell 2% in 1H17 due to weaker comparable sales. Gross margin slumped 1% as the cost of sales fell during the period. Operating income jumped 45% as operating expenses fell during the period, which led to an 88.4% increase in EPS also supported by lower interest expense and share buybacks.

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Kohl’s dividend yield

The company’s increasing dividend yield has mainly been a result of the falling prices compared to the growth in dividend per share. Share prices have fallen 27% compared to 2014. The company generates enough free cash flow to pay off its dividends.

Kohl’s has a dividend yield of 4.9% and a YTD price loss of 9.9% compared to the broad indexes. The Dow Jones Industrial Average (DJIA-INDEX) (DIA) has recorded a dividend yield of 2.3% and price gains of 18% on a YTD basis. The S&P 500 (SPX-INDEX) (SPY) has recorded a dividend yield of 2.3% and price gains of 15% on a YTD basis. The NASDAQ Composite (COMP-INDEX) (ONEQ) has recorded price gains of 23.2% on a YTD basis.

The First Trust Dow Jones Global Select Dividend Index (FGD) is a dividend ETF with exposure to Kohl’s. It has a dividend yield of 4% and a PE of 14.5x. The WisdomTree US MidCap Dividend ETF (DON) is a dividend ETF with exposure to Kohl’s. It has a dividend yield of 2.4% and a PE of 23.6x.

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