An analysis of Best Buy's dividend history, yield, growth rates, and future prospects
Best Buy Co Inc (BBY, Financial) recently announced a dividend of $0.92 per share, payable on 2023-10-10, with the ex-dividend date set for 2023-09-18. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's deep dive into Best Buy Co Inc's dividend performance and assess its sustainability.
What Does Best Buy Co Inc Do?
With $46.3 billion in consolidated fiscal 2023 sales, Best Buy is the largest pure-play consumer electronics retailer in the U.S., with roughly 8.5% share of the U.S. market and north of 35% share of offline sales, per our calculations, CTA, and Euromonitor data. The firm generates the bulk of its sales in-store, with mobile phones and tablets, computers, and appliances representing its three largest categories. Recent investments in e-commerce fulfillment, accelerated by the COVID-19 pandemic, have seen the U.S. e-commerce channel roughly double from prepandemic levels, with management estimating that it will represent a mid-30% proportion of sales moving forward.
A Glimpse at Best Buy Co Inc's Dividend History
Best Buy Co Inc has maintained a consistent dividend payment record since 2003. Dividends are currently distributed on a quarterly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Best Buy Co Inc's Dividend Yield and Growth
As of today, Best Buy Co Inc currently has a 12-month trailing dividend yield of 4.97% and a 12-month forward dividend yield of 5.08%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Best Buy Co Inc's annual dividend growth rate was 20.70%. Extended to a five-year horizon, this rate decreased to 19.30% per year. Based on Best Buy Co Inc's dividend yield and five-year growth rate, the 5-year yield on cost of Best Buy Co Inc stock as of today is approximately 12.01%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-07-31, Best Buy Co Inc's dividend payout ratio is 0.62.
Best Buy Co Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Best Buy Co Inc's profitability 8 out of 10 as of 2023-07-31, suggesting good profitability prospects. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Best Buy Co Inc's growth rank of 8 out of 10 suggests that the company's growth trajectory is good relative to its competitors. Revenue is the lifeblood of any company, and Best Buy Co Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Best Buy Co Inc's revenue has increased by approximately 8.00% per year on average, a rate that outperforms approximately 64.15% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Best Buy Co Inc's earnings increased by approximately 3.00% per year on average, a rate that outperforms approximately 37.88% of global competitors. Lastly, the company's 5-year EBITDA growth rate of 16.60% outperforms approximately 67.15% of global competitors.
Next Steps
In conclusion, Best Buy Co Inc's consistent dividend payments, impressive growth rate, sustainable payout ratio, high profitability, and strong growth metrics make it an attractive option for dividend investors. However, it's crucial to keep an eye on the company's future performance and growth prospects to ensure the sustainability of these dividends. GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
