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Will Tiffany's Dividend Hike Provide Cushion to the Stock?

Tiffany & Co. TIF raised its quarterly dividend by 12.5% to 45 cents a share (or $1.80 annually) from the prior payout of 40 cents (or $1.60 annually). The increased dividend will be paid on Jul 11, to stockholders on record as of Jun 20, 2016. This is the 15th time that the company has raised its dividend in the last 14 years. The news of the dividend hike came just a day after the company reported its first-quarter fiscal 2016 results on May 25.

Through dividend hikes, companies try to win investors and persuade them to either buy or hold the scrip instead of selling it. The question that arises now is, whether this dividend hike will help alleviate investors’ concerns after Tiffany’s lackluster performance in the recently concluded quarter. Shares of this jewelry retailer have dropped roughly 2.1% following the company’s first-quarter results.

Investors remain concerned about Tiffany's dwindling top and bottom lines. A look at the performance of this Zacks Rank #4 (Sell) company in fiscal 2015 unveils that earnings per share fell 7.9% and 3% year over year in the third and fourth quarters, respectively. Maintaining the same chronological order, we observe that net sales also declined 2.2% and 6%, respectively. Further, the company witnessed a sluggish start to fiscal 2016 as earnings per share plunged 21%, while net sales declined 7% in the first quarter.

Management anticipates earnings per share for fiscal 2016 to decrease by a mid-single-digit percentage from the prior-year period. The company had earlier projected earnings per share for fiscal 2016 to be flat to down in the mid-single digits. Tiffany now expects second-quarter earnings per share to decline at a rate equivalent to that of first-quarter fiscal 2016. The company envisions fiscal 2016 worldwide net sales to decrease by a low-single-digit percentage.

Stocks to Consider

Better-ranked stocks in the retail sector include Delta Apparel Inc. DLA and The Children's Place, Inc. PLCE, both sporting a Zacks Rank #1 (Strong Buy), and Carter's, Inc. CRI, holding a Zacks Rank #2 (Buy).


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