Comparing Dollarama (OTCMKTS:DLMAF) & Macy’s (NYSE:M)

Macy’s (NYSE:M) and Dollarama (OTCMKTS:DLMAF) are both consumer discretionary companies, but which is the better investment? We will compare the two businesses based on the strength of their earnings, risk, profitability, dividends, analyst recommendations, valuation and institutional ownership.

Dividends

Macy’s pays an annual dividend of $0.77 per share and has a dividend yield of 3.6%. Dollarama pays an annual dividend of $0.34 per share and has a dividend yield of 0.3%. Macy’s pays out 28.2% of its earnings in the form of a dividend. Dollarama pays out 12.9% 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. Macy’s has increased its dividend for 4 consecutive years. Macy’s is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation & Earnings

This table compares Macy’s and Dollarama”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Macy’s	$22.62 billion	0.25	$642.00 million	$2.73	7.93
Dollarama	$5.21 billion	6.43	$940.70 million	$2.64	47.17

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

Analyst Recommendations

This is a summary of recent ratings and price targets for Macy’s and Dollarama, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Macy’s	2	9	2	0	2.00
Dollarama	0	4	4	5	3.08

Macy’s presently has a consensus target price of $22.78, indicating a potential upside of 5.20%. Given Macy’s’ higher possible upside, research analysts clearly believe Macy’s is more favorable than Dollarama.

Insider & Institutional Ownership

87.4% of Macy’s shares are held by institutional investors. 1.1% of Macy’s shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Macy’s and Dollarama’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Macy’s	3.29%	13.21%	3.83%
Dollarama	17.32%	98.00%	17.42%

Summary

Dollarama beats Macy’s on 10 of the 17 factors compared between the two stocks.

About Macy’s

Macy’s, Inc. engages in the retail of apparel, accessories, cosmetics, home furnishings, and other consumer goods. The firm’s brands include Macy’s, Bloomingdale’s, and Bluemercury. It offers men’s, women’s, and children’s apparel, women’s accessories, intimate apparel, shoes, cosmetics, fragrances, as well as home and miscellaneous products. The company was founded by Rowland H. Macy in 1858 and is headquartered in New York, NY.

About Dollarama

Dollarama Inc. operates a chain of dollar stores in Canada. Its stores offer general merchandise, consumables, and seasonal products. It also sells its products through online store. The company was formerly known as Dollarama Capital Corporation and changed its name to Dollarama Inc. in September 2009. Dollarama Inc. was founded in 1992 and is headquartered in Mount Royal, Canada.