Dillard's Dividend Increase Raises Questions

Dillard's Dividend Increase Raises Questions
Dillard's Corporate Office at 1600 Cantrell Rd. in Little Rock. (Stephanie Dunn)

Dillard’s Inc. announced Aug. 17 that its board of directors had approved raising its quarterly cash dividend from 7 cents per share to 10 cents, the highest in company history.

The dividend is for both the Class A and Class B shareholders of record as of Sept. 29 and will be paid on Oct. 30.

The dividend would amount to about $700,000 per quarter for members of the Dillard’s family, which controls the board of directors and owns nearly 7 million shares of the company.

Some questioned the increase.

“At a time when your business is soft, you don’t increase the dividend,” said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a retail consulting and investment banking firm in New York. “So I don’t totally see the rationale.”

He said it might be an attempt to protect the stock price, which has tumbled since hitting an all-time high of $142.82 a share on April 10, 2015. A higher dividend can make a stock more attractive to investors.

Other retailers, such as Macy’s Inc. of Cincinnati, are making changes to improve sales.

Macy’s recently started opening outlets called Backstage inside its department stores. Nordstrom’s and Saks Fifth Avenue also have opened more discount stores to attract shoppers looking for savings.

In releasing its second-quarter earnings last month, Macy’s announced that it would launch a loyalty program and a new marketing strategy.

“We are working with a mindset of continuous improvement and will adapt our business in order to reach our goal of stabilizing the brick-and-mortar business while investing for accelerated growth in digital and mobile,” Jeff Gennette, Macy’s president and chief executive officer, said in the August news release.

Davidowitz said Macy’s has made other changes including adding more locations of Bluemercury, the upscale cosmetics company it bought in 2015 for $210 million. Macy’s had 127 Bluemercury stores in its second quarter, up from 111 in its previous quarter.

“Macy’s bought a cosmetics chain and is expanding it rapidly,” Davidowitz said. “So what is Dillard’s doing? Increasing its dividend.”

Securities & Exchange Commission filings show Dillard’s is expected to spend $125 million on capital expenditures in 2017, up from $105 million in 2016.

Julie Johnson Bull, a spokeswoman for Dillard’s didn’t return a call seeking comment.

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