Retail stocks are not exactly known for big dividends. But American Eagle Outfitters (NYSE:AEO) offers an 11-cent quarterly payday that equates to a 3.1% yield. Granted, a flop in share prices from pre-recession highs has helped juice yields; the five-year return on AEO stock is about -60%. But the fact that American Eagle maintained a strong dividend payout is a big opportunity for growth investors.
AEO did $3.05 billion in sales across fiscal 2008 and is set to top that number for the first time this year. What’s more, fiscal 2013 forecasts are as high as $3.35 billion.
The biggest drag on shares is that full-year 2008 earnings were $1.82, and current earnings are roughly half that. But remember, you’re not investing in a sleepy blue chip here, but a midcap with the potential to ramp up.
There are hints that unemployment and consumer confidence are on the mend. That would bode very well for AEO stock. What’s more, even if American Eagle doesn’t soar in the next six months, your 3% dividend will be a nice sweetener if you have to hold this stock for a year or two to benefit from a retail bounce.