Despite the fact that 2018’s holiday shopping season promised widespread growth, retail stocks were battered throughout the Q4 selloff as investor began pricing in the effect of tariffs and an assumed impending slowdown in the U.S. economy.
But as Wall Street extends its New Year rally, some retail stocks might be back on the menu, with lower valuations and juicier dividend yields making a great case to bargain hunters.
In today’s video, Associate Stock Strategist Ryan McQueeney explores two intriguing dividend stocks from the sector: specialty retailer Abercrombie & Fitch (ANF - Free Report) and shoe seller DSW .
These stocks have a lot in common right now; both reported earnings around the time of December’s harsh selling, and they likely have not seen a worthy response to their strong results because of it. The retailers are also sporting Zacks Rank #1 (Strong Buy) ratings. Moreover, ANF & DSW are facing technical hurdles that could keep near-term gains in check ahead of their next reports.
Abercrombie & Fitch posted an impressive double beat in its most recent earnings announcement. The young adult-focused retailer also notched comps growth of 3%, marking its fifth consecutive quarter of positive comps. At the time, ANF guided for continued strength in the holiday quarter, inspiring positive earnings estimates that lifted the stock to a #1 (Strong Buy) position.
DSW earned its #1 (Strong Buy) listing from its latest report and ensuing analyst bullishness as well. The footwear giant recorded adjusted earnings of 70 cents per share, beating the Zacks Consensus by 17 cents. DSW’s view even caused analysts to raise estimates for fiscal 2019, and now the company looks to be on the cusp of another impressive year in terms of earnings growth.
Still, ANF & DSW face challenges from a basic technical standpoint. The former has found itself stuck in a range between its 50-day and 200-day moving averages, while the latter’s shorter-term average just moved below its long-term counterpart for the first time in months. It can be difficult for certain stocks to break out of these types of trends without an outside catalyst.
But at the end of the day, ANF & DSW are trading at respectable valuations and could provide dividend-minded investors with satisfactory payouts. They’re both yielding almost 4% right now and have long histories of consistent dividend delivery.
Make sure to check out today’s video for more of Ryan’s thoughts on these two retail stocks!
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