Top Picks 2016: Nordstrom
01/19/2016 7:00 am EST
Retailers of all types fell into an awful funk in the second half of 2015, observes John Dobosz, income expert and editor of Forbes Dividend Investor.
Even Seattle-based Nordstrom (JWN), which caters to high-income shoppers, has felt the pull of gravity.
The shares—our Top Pick for 2016—tumbled 40% from July through early January, putting the stock at a three-year low.
At 14 times expected current-year earnings, Nordstrom trades at a 20% discount to its five-year average P/E and 30% below its average price-sales ratio.
Gaping discounts to historical averages also show on other valuation metrics like price-to-cash flow, price-to-book value, and enterprise value to EBITDA.
Despite the fire-sale price of Nordstrom stock, revenue has yet to take a hit, with analysts forecasting sales in the current year that ends January 2016 to climb 7.5% to $14.5 billion. Earnings, however, are expected to decrease by 7.5%.
Nordstrom has enriched shareholders with consistent and sizable dividend hikes, raising the payout at a compound annual rate of 18.6% since 2005.
At a rate of $1.48 per year, Nordstrom shares yield 3%, and the payout has plenty of room to keep on rising, with Nordstrom expected to generate $9.81 per share in cash flow from operations this year.