Dillard’s (NYSE: DDS) and Nordstrom (NYSE:JWN) are both mid-cap retail/wholesale companies, but which is the better investment? We will compare the two businesses based on the strength of their risk, valuation, institutional ownership, analyst recommendations, earnings, profitabiliy and dividends.

Dividends

Dillard’s pays an annual dividend of $0.28 per share and has a dividend yield of 0.4%. Nordstrom pays an annual dividend of $1.48 per share and has a dividend yield of 3.1%. Dillard’s pays out 5.8% of its earnings in the form of a dividend. Nordstrom pays out 69.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Nordstrom has increased its dividend for 3 consecutive years. Nordstrom is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of recent ratings and price targets for Dillard’s and Nordstrom, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Dillard’s 2 2 1 0 1.80
Nordstrom 4 15 5 0 2.04

Dillard’s currently has a consensus target price of $56.40, suggesting a potential downside of 23.39%. Nordstrom has a consensus target price of $47.43, suggesting a potential upside of 0.04%. Given Nordstrom’s stronger consensus rating and higher probable upside, analysts clearly believe Nordstrom is more favorable than Dillard’s.

Insider & Institutional Ownership

93.4% of Dillard’s shares are held by institutional investors. Comparatively, 64.4% of Nordstrom shares are held by institutional investors. 26.6% of Dillard’s shares are held by insiders. Comparatively, 7.0% of Nordstrom shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Risk and Volatility

Dillard’s has a beta of 1.12, indicating that its stock price is 12% more volatile than the S&P 500. Comparatively, Nordstrom has a beta of 0.83, indicating that its stock price is 17% less volatile than the S&P 500.

Profitability

This table compares Dillard’s and Nordstrom’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%
Nordstrom 2.51% 69.16% 7.29%

Earnings & Valuation

This table compares Dillard’s and Nordstrom’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Dillard’s $6.33 billion 0.34 $552.91 million $4.86 15.15
Nordstrom $14.86 billion 0.53 $1.70 billion $2.13 22.26

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

Summary

Nordstrom beats Dillard’s on 12 of the 17 factors compared between the two stocks.

About Dillard’s

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.

About Nordstrom

Nordstrom, Inc. is a fashion specialty retailer in the United States. The Company’s segments include Retail and Credit. As of March 20, 2017, the Company operated 344 the United States stores located in 40 states as well as an e-commerce business. The Company also offers its customers a variety of payment products and services, including credit and debit cards. As of March 20, 2017, the Retail segment included its 117 Nordstrom-branded full-line stores in the United States and Nordstrom.com, 216 off-price Nordstrom Rack stores, five Canada full-line stores, Nordstromrack.com/HauteLook, seven Trunk Club clubhouses and TrunkClub.com, two Jeffrey boutiques and two clearance stores that operate under the name Last Chance. The Company, through Credit segment, allows its customers to access a range of payment products and services, including a Nordstrom-branded private label card, approximately two Nordstrom-branded Visa credit cards and a debit card for Nordstrom purchases.

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