Wednesday, October 16, 2019

Macy's: A Buying Opportunity

M has an attractive dividend yield of 10%.
M is the country’s oldest and most reliable retailer.
The dividend discount model shows that M is trading just below fair value.
Now is a good time to buy the dips.
Macy's (M) is the best bet in a struggling retail sector. Despite a prolonged downtrend in the share price, there remain reasons to be bullish. The stock appears to be trading at or near fair value and has an excellent dividend yield, so buying dips will be a profitable strategy going forward.
Retail hasn't been doing so well. The number of store closures in 2019 has surpassed 8,200, beating the 2017 record of 8139. The number will likely be higher by year-end as the fourth quarter has only just begun.
There has been some debate about a "retail apocalypse." Some commentators think it's nothing out of the ordinary, some think it's all because of Amazon and online sales, and others think it's a sign of the US consumer struggling.
Given that 90% of all retail purchases happen at physical retail locations, we can rule out the possibility that online shopping has much to do with store closures. According to data from the US Census Bureau News provided by the Department of Commerce:
E-commerce sales in the second quarter of 2019 accounted for 10.1 percent of total sales.
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