Stage Stores: Bankruptcy or Turnaround?

05/10/2017 2:45 am EST


Ben Reynolds

CEO, Sure Dividends

Ben Reynolds editor of Sure Dividends focuses on high quality stocks with long records of dividend payments. Here, he veers from this strategy to highlight a highly speculative idea for risk takers only.

From a dividend perspective, Stage Stores (SSI) is a poor investment. However, the stock may still have merit as a value or turnaround play.

Stage Stores operates more than 750 specialty department stores in 38 states and has a small market cap of $75M. The company operates under the Bealls, Goody’s, Palais Royal, Peebles and Stage brands.

Stage Stores is a poor recommendation – the stock has declined ~90% since April of 2013 and currently pays a 23% dividend yield, helping to it rank well (quantitatively) using our system.

Unfortunately, State Stores will almost certainly cut its dividend in the near future, which would trigger an automatic sell using our rules of dividend investing.

With that said, the company does have appeal as a high risk, high reward investment. Stage Stores traded for around $20/share in 2013. It is currently trading for under $3/share.

If (and it’s a very big if) the company can return to profitability and growth, its share price could increase by as much as 7x. The more likely outcome is the company cannot regain its profitability and declines into bankruptcy.

Investors are waiting for any kind of catalyst to drive Stage Stores upwards. If the company can report positive sales growth during their earnings release in early June, Stage’s stock will react accordingly.

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