Investors have been hearing about "the death of retail" for years. It's been an easy sector to "dunk on," as the kids would say, as debt-laden and poorly run retailers failed to adapt to the times and fell by the wayside. But that doesn't mean that there isn't a place out there for well-run retailers in investor portfolios.
In fact, one apparel retailer, Buckle(NYSE: BKE), has trounced the broader market in recent times. Buckle is up 16% over the past year, while the S&P 500 and Nasdaq are down 17% and 29%, respectively, over the same time frame.
Buckle features a growing business, a strong balance sheet, and a reasonable valuation, and it cuts an interesting figure as a dividend stock.
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What is Buckle?
Founded in 1948, Buckle is a retailer that sells apparel, footwear, and accessories for men and women in the United States. The company has a large portfolio of brands, including BKE, Buckle Black, Salvage, Daytrip, and more.
Buckle currently operates 441 stores in 42 states. In recent years, the company has worked to move stores from mall-based locations to what it calls "power center locations" in order to gain more off-mall exposure.
Buckle differentiates itself by offering customers services like free hemming and gift-wrapping, and it also offers layaway financing and a loyalty program. The company's mission is "to create the most enjoyable shopping experience possible for our guests," and it's hard to find fault in that simple but effective mission statement.
Buckle keeps growing
Unlike many retailers, this isn't a business in decline or some sort of "cigar butt" investment, as Warren Buffett might say. Although revenue growth was fairly stagnant between 2020 and 2021, revenue grew from $901 million to over $1.2 billion between January 2021 and January 2022 and continued to climb to $1.3 billion over the last 12 months.
While some investors were skeptical that 2021 was a one-time jump as a result of the pandemic, Buckle managed to stay ahead of these tough comps in 2022. In December 2022, Buckle posted an impressive 7% comparable sales growth, which is reason for optimism for the year ahead.
Appealing valuation and strong balance sheet
While Buckle has been beating the market over the past year, that doesn't mean that you've missed the boat on the stock. Even after the stock's torrid run during the second half of 2022, in which it gained nearly 70%, valuation still looks appealing, with shares trading at just 9.5 times earnings, far cheaper than the average multiple for the S&P 500.
Buckle looks even more appealing based on the fact that, unlike many retail peers, it has no debt. This gives Buckle plenty of flexibility moving forward and spares its shareholders from the types of liquidity concerns that investors in other companies in the retail space have had to worry about in recent years.
Dividend is best of both worlds
In addition to this palatable valuation, Buckle is a particularly interesting dividend stock. Buckle pays a quarterly dividend of $0.35, and shares currently yield about 3%. This is a solid, market-beating dividend, but you may be thinking that there are plenty of stocks out there that yield 3% or more, so what makes Buckle stand out from the crowd?
What really makes Buckle shine as a dividend stock is that investors get the best of both worlds with a reliable quarterly dividend and the upside of a variable special dividend. Buckle typically rewards its shareholders by paying out a large special dividend at the end of each fiscal year.
The stock is currently paying out $0.35 per quarter as a regular dividend, but it will pay a special dividend of $2.65 later in January to shareholders of record as of January 19th.
Last year, the stock paid out a special dividend of $5.65. In 2020, the stock paid out a special dividend of $2, which is impressive, especially when considering that this was a time when many retailers were cutting their dividends altogether due to the uncertainty caused by the COVID-19 pandemic.
Buckle up
After a strong performance in 2022, Buckle continues to look like a strong buy for dividend investors and value investors alike. While retailers faced a challenging landscape in recent times, Buckle has proven the ability to navigate through not only the COVID pandemic but also 2022's inflationary environment. Buckle's attractive valuation, continued growth, strong balance sheet, and compelling combination of regular and special dividends make it an attractive buy for all investors.
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Michael Byrne has positions in Buckle. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
