7 Back-to-School Dividend Stocks
Cash in on these consumer stocks paying 2% or better.
As millions of children return to the classroom, American parents are dealing with plenty of stresses – both new ones related to the lingering coronavirus challenges and old ones including the grind of getting their kids to the bus stop on time. But back-to-school season is decidedly enjoyable for many retail stocks that have been riding high on hopes of a spending surge in late 2021. Many of these stocks also offer a generous dividend on top of strong revenue trends. With the typical stock in the S&P 500 index yielding just 1.3%, these consumer-oriented picks offer a significantly higher income stream as well as the potential to play a resurgence in spending this fall. Here are some of the top dividend stocks to watch in the consumer space.
American Eagle Outfitters Inc.
Clothing retailer American Eagle has roughly doubled from its late 2020 lows, thanks to significant gains in margins made by pushing into direct selling online. As with many consumer brands, the pandemic caused a lot of short-term pain for American Eagle, but it also forced management to accelerate their plans to build a true 21st century retailer. Case in point: American Eagle recently acquired logistics and shipping startup AirTerra, a firm founded by a former Nordstrom Inc. (JWN) executive designed to manage shipping inventory efficiently. The rebound from the pandemic and back-to-school buzz is nice, but the long-term potential in this dividend stock could be the real draw.
Genuine Parts Co.
Another among the top dividend stocks to watch this season is Genuine Parts, the auto parts brand behind NAPA. And while not exactly a backpack stuffer, a reliable car is a must-have for many parents who put off upgrading or replacing their ride during the remote work and remote schooling craze of the last 12 to 18 months. Now, with schools back open to in-person education and many clubs and activities looking to resume their normal schedules, transportation is again in focus. Unfortunately, supply chain disruptions and inventory concerns have forced shoppers to pay a big premium for new or used cars – meaning lots of folks shopping for car parts instead of a new vehicle. Sales are set to grow by double digits this fiscal year, but more important for low-risk income investors is that GPC just tallied its 65th consecutive year of dividend increases. That’s a track record you can rely on.
After a multiyear decay in its business, with share prices dipping from more than $30 in 2016 to a 2020 low of less than $8, Hanesbrands seems to have finally turned a corner and is now getting back on track. In fact, in early 2021 it topped $21 a share for the first time since 2018 thanks to strong hopes for this year. And back-to-school shopping trends could provide another leg up to this rally as earnings are forecast to grow by roughly 20% this fiscal year, to $1.75 per share – easily covering the 60-cent annual dividend and leaving room for future growth in payouts.
Kontoor Brands Inc.
North Carolina-based Kontoor markets apparel primarily under the Wrangler and Lee brands in the U.S. Once seen as a bit down-market, Kontoor has managed to rejuvenate its brand in recent years and is now enjoying significant organic growth that includes projections of a 16% revenue increase this year. Part of that is a return to in-store shopping, but Kontoor has also pushed big into e-commerce just in time for the back-to-school blitz. And with projected earnings of more than $4.10 per share this year but dividends of just $1.60 annually, there is ample headroom for increases if this success keeps up.
Department store Macy’s isn’t quite the popular brand it once was, thanks to e-commerce pressures, but it remains a go-to store for back-to-school shopping. And after some restructuring in recent years has led to greater efficiency and vaccinated Americans have returned to the mall, M stock has gone on a tear lately. Macy’s on Aug. 19 surged about 20% to a multiyear high after strong second-quarter earnings that beat expectations, hinting that whatever past troubles have hit this stock may be over. Its recently reinstated dividend of 15 cents per quarter annualizes to a decent yield and could continue to grow over time if this success keeps up. Now on a hot streak, Macy’s has earned its spot as one of the top consumer-facing dividend stocks.
Tapestry, the $11 billion brand behind luxury fashion nameplates including Coach, Kate Spade and other high-profile collections, may not seem like it makes the kind of gear kids would be loading up on for back-to-school shopping. But remember that in this age of social media (and recent social isolation), lots of people are dressing to impress in 2021. Additionally, this retail trade dovetails nicely with the return-to-office trends we’re seeing in the U.S. that mean young professionals have to trade sweatpants for slacks once more. TPR is projecting double-digit sales growth this year and next, and considering that shares are up by nearly 200% in the last 12 months, there’s nice momentum for short-term profits on top of the newly reinstated dividend.
Travel + Leisure Co.
You may not immediately think of travel as a school-related expense. But a return to in-person school means a return to planning ahead for holiday travel, spring break and summer vacations. Orlando-based Travel + Leisure is seeing a huge uptick in its rentals and private-label booking business as a result. Revenue is set to rise 39% this year and 21% next year as the company moves out of the red. And its projected earnings of $3.23 per share more than cover the annual dividend of $1.20.