7 Retail Stocks to Buy for the Dividends

These retail-oriented picks offer generous yields.

There has been a big shake-up for retailers in 2020, with the pandemic bringing immediate pressures to a sector that has already seen its share of disruption in the age of e-commerce. This has been particularly true for retail dividend stocks, which by and large tend to be legacy brick-and-mortar stores like The Gap (ticker: GPS) or Macy’s (M) that have struggled to adapt. That said, it doesn’t mean that all of retail is off limits for dividend investors. All of these retail-oriented picks offer payouts that are higher than current yield of 1.8% or so for the typical stock in the S&P 500. Here are seven retail stocks to buy for dividends.

Big Lots (BIG)

Big Lots is a “closeout” and wholesale retailer that specializes in buying products in bulk or at deep discounts, and then passing those savings on to its customers. Particularly in an uncertain economic environment, the cost savings offered by BIG are increasingly appealing to shoppers. The merchant’s wide array of products includes everything from furniture and cleaning products to school supplies and seasonal decor, and this diversification allows Big Lots to generate a reasonably consistent stream of revenue. Net sales in the second quarter hit $1.64 billion thanks to a 31% year-over-year increase in same-store sales as shoppers looked for discounts amid the pandemic. That, in turn, has allowed the company to offer generous and sustainable dividends of 30 cents each quarter.

Current yield: 2.3%

Dick’s Sporting Goods (DKS)

If you haven’t paid attention to $5 billion sporting-goods giant Dick’s lately, you may be surprised to find that this retailer has really come alive in the last several months. With shares topping $60 for the first time since late 2016, the stock is now up roughly threefold compared with its spring lows as sales have proven resilient even amid the pandemic. Net sales popped to $2.71 billion in the most recent quarter, a 20% increase compared to the same period in the prior year (with online sales surging nearly 200%). Even more important for income investors, however, is that the dividend moved slightly higher in early 2020 and remains steady for the foreseeable future.

Current yield: 2%

Haverty Furniture Cos. (HVT)

You may not think a traditional furniture store like Havertys would be a standout in 2020, but the stock is actually up around 30% year to date to significantly outperform many other components of the S&P 500. That’s in part because of the pandemic forcing more folks to hang out at home and thus rethinking their furnishings, but it’s also because of a recent push into “omnichannel” e-commerce offerings that bring its reliable brand to customers regardless of whether they shop in the store or online. As a result, HVT has managed to continue its strong track record of reliable revenue and consistent dividends.

Current yield: 3.2

Home Depot (HD)

One of the few specialty retail stocks that never seems to run into significant long-term trouble, Home Depot has a stranglehold on the U.S. home improvement market with some 400,000 employees and roughly 2,300 locations. Even more impressive, however, is that internet research firm eMarketer ranked HD as No. 5 among U.S. companies in overall e-commerce sales earlier in 2020, just behind Apple (AAPL). Granted, part of that is because the dollar amounts are higher for appliances or construction materials instead of a pair of socks — but it proves HD isn’t just resistant to the digital pressures that have weighed on other specialty retails; it’s actually thriving in this modern shopping environment, and paying an above-average dividend.

Current yield: 2.1%

Realty Income Corp. (O)

Billed as “the monthly dividend company,” Realty Income is among the largest real estate investment trusts, or REITs, on Wall Street. The reason it can pay out regular dividends monthly is because this stock focuses on mostly single-tenant retail properties that operate under long-term, net lease agreements that pass nearly all maintenance and upkeep costs on to the tenant. Tenants include free-standing big box stores like Walmart (WMT) and smaller specialty retailers such as Dollar Tree (DLTR). It’s easy to see why this model that focuses on deep-pocketed chains avoids some of the complexity and uncertainty associated with smaller retail properties. As a result, O can offer reliable dividends in nearly any market environment.

Current yield: 4.6%

Simon Property Group (SPG)

As a REIT, Simon Property is not a dedicated retailer but rather the largest publicly traded operator of shopping malls in the U.S. at roughly $20 billion in market capitalization and a staggering 200 million square feet of space across 200 properties. Unfortunately, Simon was hit hard by the pandemic along with many of its tenants, and the company’s dividend was slashed from $2.10 quarterly to $1.30 as a result. However, shares have been very stable since their early 2020 troubles — rising by more than 20% since their April low — and at current pricing, the dividend adds up to a much better yield than what you’ll find elsewhere in retail.

Current yield: 7.9%

Weis Markets (WMK)

Regional grocery store chain Weis may not seem like much. It’s slightly larger than $1 billion in market value and operates only about 200 or so locations, most of which are in Pennsylvania. Luckily for WMK investors, 2020 has been a pretty good year thanks to more Americans relying on grocery store purchases in the wake of the pandemic. That has coincided with a slow but steady improvement in the company’s top line — as net sales rose by 18% year over year to $2.08 billion in the second quarter — and a very reliable 31-cent quarterly dividend that continues to offer shareholders a regular paycheck that is above average when compared with other publicly traded grocers.

Current yield: 2.4%

Seven retail stocks to buy for the dividends:

— Big Lots (BIG)

— Dick’s Sporting Goods (DKS)

— Haverty Furniture Cos. (HVT)

— Home Depot (HD)

— Realty Income Corp. (O)

— Simon Property Group (SPG)

— Weis Markets (WMK)

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