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A Look at Kohl’s Capital Allocation Plans

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Buybacks

Despite heavy investments, Kohl’s Corporation (KSS) is committed to its share buyback program. Share repurchases improve a company’s EPS by reducing the average share count. For the first half of fiscal 2018, Kohl’s repurchased 2.5 million shares.

For fiscal 2018, Kohl’s had previously guided a share buyback worth $300.0 million–$400.0 million. In 2016, the company increased its share buyback authorization to $2.0 billion.

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Dividend yield

Dividend yield represents the cash flow received for each dollar invested in the company’s stock. The dividend yield is a significant metric in making investment decisions. Kohl’s quarterly dividend payout stands at $0.61 per share. The company’s most recent dividend hike of 10.9% came in March.

Kohl’s current dividend yield of 3.1% is based on its closing price of $79.26 on September 17. Macy’s (M) current dividend yield was 4.3% on the day, and Dillard’s (DDS) current dividend yield totaled 0.5%. Nordstrom’s (JWN) current dividend yield stood at 2.3% on September 17, and JCPenney (JCP) doesn’t pay dividends.

Forward PE multiple

The forward PE (price-to-earnings) multiple is calculated by dividing a company’s stock price by analysts’ earnings estimates for the upcoming four quarters. Comparing the PE multiples of companies in the same sector helps investors make investment decisions.

On September 17, Kohl’s was trading at a 12-month forward PE multiple of ~14.0x. Macy’s traded at a 12-month forward PE multiple of 9.7x. However, Nordstrom and Dillard’s traded at 12-month forward PE multiples of 12.3x and 17.3x, respectively, on September 17, higher than Kohl’s forward PE multiple.

Analysts expect Kohl’s sales for fiscal 2018 to increase 0.6%. Macy’s top-line growth rate is expected to reach 0.6%, and Dillard’s revenues are projected to increase 0.5%. Nordstrom is expected to deliver top-line growth of 2.8%. However, JCPenney’s top line is expected to return -2.3% in fiscal 2018.

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