Retail Recovery Benefiting Income Investors

This hasn’t been the best year for U.S. retailers. But retail sales have undoubtedly been a major contributor to America’s post-recession recovery.
U.S. retail sales have risen 20% since 2009, the year the Great Recession hit America’s economy hardest. Even with sales slowing in 2013, this year retailers are on track to surpass $5 trillion for the first time ever.
The retail recovery has vastly outpaced the overall recovery in U.S. consumer spending. From 2010 through 2012, retail sales increased by an average of 6.7% annually. Consumer spending has only increased 2.3% per year during that time.
Those numbers have slowed a bit of late. In October, retail sales only increased 3.7% year over year. For the year, 2013 retail sales are expected to increase 5% from 2012. Similar increases are expected in 2014 and 2015, according to economic forecasts. That’s not the 6.7% growth we’ve seen the last three years. But it’s still well ahead of the expected 2% annual growth in consumer spending between now and 2015.
Retailers are becoming more cash rich by the month. For investors, the retail recovery can translate to dividends.
Some of America’s top retailers are also among the stock market’s fastest dividend growers.
Retail stocks have never been the first place investors look when searching for yields. Most yield less than one percent. Many – including Amazon, J.C. Penney and Sears – don’t offer a dividend at all.
Nevertheless, a few cash-rich retailers have been growing their dividends consistently in recent years. Target (NYSE: TGT) is perhaps the best example. The No. 2 retailer in the U.S. after Wal-Mart (NYSE: WMT), Target has increased its dividend every year since 2002. The company’s recent dividend hike brought the quarterly payout to $0.43, a 2.7% yield – one of the higher yields in the retail sector.
Macy’s (NYSE: M) is another example. The New York-based department store has upped its dividend each of the last three years, quintupling the quarterly payout from 5 cents per share as recently as March 2011 to 25 cents per share today. Not coincidentally, Macy’s profits have risen 58% the last two years, and are poised for another increase in 2013. With Black Friday right around the corner (and the Macy’s Thanksgiving Day Parade), the company could be in for another big quarter.
McDonald’s (NYSE: MCD) is the top dividend grower on the food retail side. The fast-food giant has increased its dividend every year since 2008, and currently offers an appetizing yield of 3.3%. McDonald’s dividend has more than doubled over the past five years.
Now that Black Friday nearly upon us, it’s a good time to increase your U.S. retail exposure. And that’s precisely what we just did in our $100k Portfolio service.
In this month’s edition of the $100k Portfolio, my colleague Ian Wyatt and I introduced subscribers to an undervalued stock that is also an ideal play on the ongoing U.S. retail recovery. It’s both a value stock and a growth stock. Call it a “growth value stock.”
It’s also a dividend grower. Retail isn’t typically a place income investors go searching for yield. But with the retail recovery growing in recent years, more U.S. retailers are starting to buck tradition and return some of their excess cash to shareholders.
Ian Wyatt has found 3 stocks that pay dividends so big — you can retire on them. The Wall Street Journal calls them, “mega-dividends.” These stocks have a history of consistently RAISING their dividends… quarter after quarter. In fact, one of these cash-cranking companies hiked its dividend 10-fold! So, if these ever-increasing payouts sound good to you… Click here for all the details.

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