Dillard’s (NYSE: DDS) and Macy’s (NYSE:M) are both retail/wholesale companies, but which is the superior stock? We will contrast the two companies based on the strength of their earnings, valuation, profitabiliy, institutional ownership, analyst recommendations, risk and dividends.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Dillard’s and Macy’s, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Dillard’s 2 2 1 0 1.80
Macy’s 1 15 6 0 2.23

Dillard’s presently has a consensus target price of $55.80, indicating a potential upside of 0.38%. Macy’s has a consensus target price of $31.47, indicating a potential upside of 37.26%. Given Macy’s’ stronger consensus rating and higher probable upside, analysts plainly believe Macy’s is more favorable than Dillard’s.

Valuation and Earnings

This table compares Dillard’s and Macy’s’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Dillard’s $6.33 billion 0.26 $552.91 million $4.86 11.44
Macy’s $25.35 billion 0.28 $2.76 billion $1.85 12.39

Macy’s has higher revenue and earnings than Dillard’s. Dillard’s is trading at a lower price-to-earnings ratio than Macy’s, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

86.0% of Dillard’s shares are owned by institutional investors. Comparatively, 86.3% of Macy’s shares are owned by institutional investors. 23.3% of Dillard’s shares are owned by company insiders. Comparatively, 1.4% of Macy’s shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Dividends

Dillard’s pays an annual dividend of $0.28 per share and has a dividend yield of 0.5%. Macy’s pays an annual dividend of $1.51 per share and has a dividend yield of 6.6%. Dillard’s pays out 5.8% of its earnings in the form of a dividend. Macy’s pays out 81.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Dillard’s has raised its dividend for 3 consecutive years and Macy’s has raised its dividend for 6 consecutive years. Macy’s is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

Dillard’s has a beta of 1.03, indicating that its stock price is 3% more volatile than the S&P 500. Comparatively, Macy’s has a beta of 0.77, indicating that its stock price is 23% less volatile than the S&P 500.

Profitability

This table compares Dillard’s and Macy’s’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Dillard’s 2.50% 9.39% 4.05%
Macy’s 2.26% 22.37% 4.58%

Summary

Macy’s beats Dillard’s on 11 of the 17 factors compared between the two stocks.

Dillard’s Company Profile

Dillard’s, Inc. is a retailer of fashion apparel, cosmetics and home furnishing. As of January 28, 2017, the Company operated 293 Dillard’s stores, including 25 clearance centers, and an Internet store offering a selection of merchandise, including fashion apparel for women, men and children, accessories, cosmetics, home furnishings and other consumer goods. The Company’s segments include the Retail operations segment and the Construction segment. The Retail operations segment includes the operation of the Company’s retail department stores. The Construction segment includes the operations of CDI Contractors, LLC (CDI), a general contracting construction company. CDI’s business includes constructing and remodeling stores for the Company. As of January 28, 2017, the Company operated retail department stores in 29 states, primarily in the southwest, southeast and midwest regions of the United States.

Macy’s Company Profile

Macy’s, Inc. is an omnichannel retail company operating stores, Websites and mobile applications under various brands, such as Macy’s, Bloomingdale’s and Bluemercury. The Company sells a range of merchandise, including apparel and accessories (men’s, women’s and children’s), cosmetics, home furnishings and other consumer goods. Its subsidiaries provide various support functions to its retail operations. Its bank subsidiary, FDS Bank, provides credit processing, certain collections, customer service and credit marketing services in respect of all credit card accounts that are owned either by Department Stores National Bank (DSNB), which is a subsidiary of Citibank N.A., or FDS Bank. The private label brands offered by the Company include Alfani, American Rag, Aqua, Bar III, Belgique, Charter Club, Club Room, Epic Threads, first impressions, Giani Bernini, Greg Norman for Tasso Elba, Holiday Lane, Home Design, Hotel Collection, John Ashford, Karen Scott, Thalia Sodi and lune+aster.

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