In this article, we will take a look at some of the best dividend stocks from the retail sector.
The retail industry has been undergoing a digital transformation since the COVID-19 pandemic. The industry has shifted from a broad, supply-driven model to a more data-focused, ultra-personalized approach adjusted according to individual customers. However, the transition was challenging due to elevated costs and the complexities of existing business models and legacy systems.
According to a report by Deloitte, the industry has experienced slow growth in recent years, with a compound annual growth rate ranging between 1.5% and 3.5%, depending on the sub-sectors. Profit margins also remained under pressure because of consumers’ expectations for seamless omnichannel experiences. Digital adaption was needed, but the costs associated with it created a growing hunger for retailers to increase efficiency, establish strategic partnerships, and investigate alternative revenue streams to remain relevant and competitive.
As retailers strive to improve operations with limited resources, technology and automation have emerged as promising solutions. Generative artificial intelligence, in particular, has moved beyond initial hype and is generating measurable benefits. According to Deloitte, retailers that integrated AI-powered chatbots during Black Friday experienced a 15% improvement in conversion rates. The report also mentioned that six in ten retail buyers reported that AI-enhanced tools improved demand forecasting and inventory management in 2024. Digital efficiency has become a priority, and 2025 could mark a turning point for advancements in several fields, including merchandising, supply chain management, and marketing. Notably, seven in ten retail executives expect to implement AI capabilities within the year to enhance personalization efforts.
Consumer spending in February grew at a slower pace than expected. However, underlying data suggested that sales were strong despite concerns about economic slowdown and high inflation. The report was released during high uncertainty over economic growth, especially as President Donald Trump’s policies led to surging tariff disputes with important US trading partners. Economists have shown their concerns that these tariffs could contribute to higher inflation and weaken economic momentum. Retail sales for February rose by 0.2%, rebounding from the previous month’s downwardly revised 1.2% decline but missing the Dow Jones estimate of a 0.6% increase, as per preliminary data from the Commerce Department. The data also highlighted that retail sales climbed 0.3%, excluding auto sales, which aligned with market expectations.
According to the report, online spending played a key role in driving sales growth for the month, as nonstore retailers reported a 2.4% growth. In addition, health and personal care sales also experienced a 1.7% hike, while the food and beverage sectors saw a 0.4% growth. On the whole, retail sales grew 3.1% as compared to the same period last year, outperforming the 2.8% inflation rate measured by the consumer price index.
The retail sector has largely stabilized since the pandemic, making it an investment area worth considering. Investors are gravitating toward this sector, aiming to capitalize on growing consumer demand. Moreover, the sector is known for its history of providing dividend payments to shareholders. According to a report by Janus Henderson, the general retail sector distributed $8.4 billion in dividends in the third quarter of 2024, up significantly from $2.8 billion paid during the same period in 2020.
A female customer browsing a variety of body care products in a retail store.
Our Methodology:
For this article, we scanned Insider Monkey’s database of over 1,000 hedge funds as of Q4 2024 and picked companies that operate in the retail industry. These companies sell goods and services directly to consumers for personal use and operate through physical stores, online platforms, or a combination of both. From that list, we picked 11 stocks with the highest number of hedge fund investors and ranked them in ascending order of the hedge funds’ sentiment towards them.
At Insider Monkey, we are obsessed with hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
11. Nordstrom, Inc. (NYSE:JWN)
Number of Hedge Fund Holders: 35
Nordstrom, Inc. (NYSE:JWN) is a Washington-based luxury department store that offers products in apparel, beauty, shoes, home goods, and other accessories. The company’s business model involves omnichannel integration, which means that customers can smoothly shop in-store, online, or via mobile. The expansion of this format was the company’s key priority throughout the quarter, targeting cost-conscious customers. In the past 12 months, the stock has surged by over 21%.
In the fourth quarter of 2024, Nordstrom, Inc. (NYSE:JWN) reported revenue of $4.32 billion, which showed a 2.19% growth from the same period last year. Its net earnings for the quarter came in at $165 million, or $0.97 per diluted share (EPS). In its earnings report, the company highlighted that women’s apparel, activewear, and men’s apparel experienced the strongest growth in FY24, as compared to 2023. JWN is gaining traction among investors as the company’s digital segment is growing. In the most recent quarter, digital sales represented 38% of the total sales.
In addition to strong earnings, Nordstrom, Inc. (NYSE:JWN)’s cash position also came in strong. The company ended the quarter with over $1 billion in cash and cash equivalents, up from $628 million in the prior-year period. Moreover, it generated over $1.2 billion in operating cash flow in 2024, compared with $627 million a year ago.
Nordstrom, Inc. (NYSE:JWN) currently offers a quarterly dividend of $0.19 per share and has a dividend yield of 3.11%, as of March 29. It is among the best dividend stocks from the retail sector.
10. Best Buy Co., Inc. (NYSE:BBY)
Number of Hedge Fund Holders: 38
Best Buy Co., Inc. (NYSE:BBY) is an American multinational consumer electronics retailer that offers a wide range of related products and services. In addition to its retail stores, the company is also widely known for its online presence, both of which collectively contribute a lot to its omnichannel strategy. It also focuses on managing vendor relationships effectively and has a strong connection to major brands, such as Apple and Samsung. This stable vendor relationship helps the company to navigate consumer sentiment.
In the fourth quarter of FY25, Best Buy Co., Inc. (NYSE:BBY) reported revenue of $13.9 billion, down by 4.7% from the same period last year. The company’s International segment contributed $1.2 billion in revenues. Its effective leveraging of omnichannel strategy could be seen from its growing digital sales. The company’s domestic online revenue came in at $5.02 billion, which grew by 2.6% from the prior-year period. Due to this, it plans to further strengthen this area by expanding new revenue streams, such as Best Buy Marketplace and Best Buy Ads.
Best Buy Co., Inc. (NYSE:BBY) is a solid dividend payer, boasting a strong balance sheet. The company ended the quarter with $1.6 billion in cash and cash equivalents. Its operating cash flow for FY25 came in at $2 billion, up from $1.4 billion in FY24. The company offers a quarterly dividend of $0.95 per share, growing it by 1.1% in March. This marked the company’s 12th consecutive year of dividend growth, which makes it one of the best dividend stocks in the retail sector. The stock supports a dividend yield of 5.24%, as of March 29.
9. DICK’S Sporting Goods, Inc. (NYSE:DKS)
Number of Hedge Fund Holders: 45
DICK’S Sporting Goods, Inc. (NYSE:DKS) is a Pennsylvania-based chain of sporting goods stores. The company has over 700 stores and integrates its physical locations with its online presence. It plans to diversify its brand offerings as propriety brands represent 13% of its net sales. The company’s ScoreCard Rewards loyalty program is crucial in this regard as it has over 25 million active members and accounts for approximately 70% of its sales.
In the fourth quarter of 2024, DICK’S Sporting Goods, Inc. (NYSE:DKS) reported $3.89 billion in revenue, which experienced a 0.5% growth from the same period last year. The revenue also beat analysts’ estimates by $122.89 million. The company’s comparable sales for the quarter grew by 6.4%. DKS posted a net income of $300 million, up from $296 million in the prior-year period. It is actively working on its expansion strategy as the company opened seven House of Sport locations and 15 DICK’S Field House locations during 2024. In addition, it intends to launch approximately 16 House of Sport locations and approximately 18 additional DICK’S Field House locations in 2025.
At the end of the year, DICK’S Sporting Goods, Inc. (NYSE:DKS) had nearly $1.7 billion available in cash and cash equivalents. Its operating cash flow for the year came in at $1.3 billion, compared with $1.52 billion in 2023. The company remained committed to its shareholder obligation, returning $362 million to shareholders through dividends during FY24.
On March 11, DICK’S Sporting Goods, Inc. (NYSE:DKS) declared a 10% growth in its quarterly dividend to $1.2125 per share. Through this increase, the company stretched its dividend growth streak to 16 years, which places DKS on our list of the best dividend stocks. As of March 29, the stock supports a dividend yield of 2.40%.
8. Dollar General Corporation (NYSE:DG)
Number of Hedge Fund Holders: 53
Dollar General Corporation (NYSE:DG) is an American chain of discount stores. The company faced some challenges in the past year, with the stock declining significantly by over 45% over the past 12 months. It faced headwinds from weaker consumer spending and inflation. In addition, competition from its competitors took a toll on the stock. However, analysts are presenting a positive outlook on the company as it continues to expand rapidly and has a solid turnaround plan. Moreover, the stock is currently cheap, trading at a forward P/E of 15.67.
To make up for its losses, Dollar General Corporation (NYSE:DG) announced the Back to Basics plan, which includes better inventory management and enhanced in-stock levels. The company is also experimenting with same-day delivery pilot and testing home delivery by using the DG app at 75 of its stores. Due to these strategies, the company’s recent quarterly earnings were encouraging. It reported a revenue of $10.3 billion in the fourth quarter of 2024, which showed a 4.5% growth from the same period last year. The revenue surpassed analysts’ estimates by $46.3 million. The company also reported a 1.2% growth in its same-store sales.
Dollar General Corporation (NYSE:DG) also posted a solid cash position, with its cash and cash equivalents growing to $932.5 million in 2024, from $537.2 million in 2023. The company also reported a 25.3% YoY growth in its operating cash flow at $3 billion. It currently offers a quarterly dividend of $0.59 per share and has a dividend yield of 2.74%, as of March 29.
7. Target Corporation (NYSE:TGT)
Number of Hedge Fund Holders: 56
Target Corporation (NYSE:TGT) is an American retail corporation, headquartered in Minnesota. The company operates a chain of hypermarkets and discount department stores. The stock has struggled a lot in the past, with the share price falling by nearly 42% in the past 12 months. Customers have been cutting back on spending, which has affected the company’s growth. In addition, the recent tariff issues may lead to a less-favorable spending climate for the company. However, TGT has a strong foundation, which would help it rebound.
Target Corporation (NYSE:TGT) has a strong cash position, providing it with a competitive edge over its peers. In FY24, the company reported an operating cash flow of $7.3 billion. Due to this strong cash position, it was able to return $513 million to shareholders through dividends in the fourth quarter of 2024, compared with $508 million in the prior-year period. Currently, it pays a quarterly dividend of $1.12 per share for a dividend yield of 4.32%, as of March 29. The company is a Dividend King, having raised its payouts for 53 consecutive years, which makes it one of the best dividend stocks on our list.
At the end of Q4 2024, 56 hedge funds tracked by Insider Monkey held stakes in Target Corporation (NYSE:TGT), up from 49 in the previous quarter. The collective value of these stakes is over $1 billion. With nearly 2.6 million shares, Diamond Hill Capital was the company’s leading stakeholder in Q4.
6. The Kroger Co. (NYSE:KR)
Number of Hedge Fund Holders: 60
The Kroger Co. (NYSE:KR) is an American retail company that operates a network of supermarkets and multi-department stores across the US. The company operates over 2,700 supermarkets under multiple grocery brands. An important aspect of its strategy is its varied retail format, which incorporates pharmacies and fuel centers in numerous locations. This approach enables the company to attract a wide range of customers while minimizing reliance on a single revenue source. The stock is generating solid returns in 2025, surging by over 7% so far this year, while its 12-month return came in at over 17%.
In the fourth quarter of 2024, The Kroger Co. (NYSE:KR) reported revenue of $34.3 billion, which declined by 7% from the same period last year. The revenue also missed analysts’ estimates of $34.7 billion. The company’s operating profit also dropped by over 27% on a YoY basis. However, its Alternative Profit Businesses, encompassing advertising and data services, generated $1.35 billion in operating profit, driven by a 17% increase in media-related revenue. Digital sales saw an 11% uptick, highlighting ongoing initiatives to enhance the customer experience. Additionally, the launch of over 900 new products under the “Our Brands” portfolio emphasized its commitment to expanding private-label offerings to boost profitability.
The Kroger Co. (NYSE:KR)’s cash position came in strong, which makes it a reliable dividend payer. In FY24, the company reported an operating cash flow of $5.8 billion. Over the year, the company distributed $883 million worth of dividends to shareholders. Its quarterly dividend comes in at $0.32 per share for a dividend yield of 1.92%, as of March 29. KR is one of the best dividend stocks on our list as the company maintains an 18-year streak of consistent dividend growth.
5. Lowe’s Companies, Inc. (NYSE:LOW)
Number of Hedge Fund Holders: 70
Lowe’s Companies, Inc. (NYSE:LOW) is a North Carolina-based home improvement company that has operations in over 1,700 locations across the US. The company aims to fulfill its customer needs, and for that, it is using its Total Home strategy, which would offer services for both DIY and Pro customers. In addition, it is also working to enhance its market position. Lowe’s plans to boost its digital presence while streamlining supply chain operations. It also intends to engage effectively with its customers through digital channels.
Lowe’s Companies, Inc. (NYSE:LOW) reported stable earnings in the fourth quarter of 2024, with revenues coming in at $18.55 billion. Though the revenue fell slightly by 0.3% on a YoY basis, it managed to beat earnings’ estimates by $260 million. Moreover, comparable sales grew by 0.2% due to strong performance in the Pro and digital segments. A successful holiday season and rebuilding efforts following the hurricane also contributed to this growth.
Lowe’s Companies, Inc. (NYSE:LOW)’s cash and cash equivalents came in at $1.8 billion at the end of 2024, up from $921 million in the previous year. The company’s cash generation also remained strong as its operating cash flow for FY24 grew to $9.7 billion in FY24 from $8.1 billion in 2023. Throughout the year, the company returned $6.5 billion to shareholders in dividends and share repurchases.
On March 21, Lowe’s Companies, Inc. (NYSE:LOW) declared a quarterly dividend of $1.15 per share, which fell in line with its previous dividend. Overall, the company has raised its payouts for 59 consecutive years, which makes LOW one of the best dividend stocks in the retail sector. As of March 29, the stock has a dividend yield of 2.01%.
4. The TJX Companies, Inc. (NYSE:TJX)
Number of Hedge Fund Holders: 74
The TJX Companies, Inc. (NYSE:TJX) is an American multinational off-price department store corporation that operates various brands, including T.J. Maxx, Marshalls, and HomeGoods. The company has a flexible business model that allows for active inventory management and alluring price strategies. It is focusing on expanding its operations, both in physical stores and market presence. In the past 12 months, the stock has surged by over 18.5%.
In the fourth quarter of FY25, The TJX Companies, Inc. (NYSE:TJX) reported revenue of $16.35 billion, which fell slightly by 0.3% from the same period last year. The revenue surpassed analysts’ estimates by $109.7 million. For FY25, the company’s consolidated comparable sales grew by 4%, driven by an increase in customer transactions. Its net income for the year came in at $4.9 billion, up 10% from the prior-year period. TJX Canada remained the winner in Q4 2025 with over 10% comparable store sales.
The TJX Companies, Inc. (NYSE:TJX)’s cash position was also encouraging for income investors. The company generated $6.1 billion in operating cash flow in FY25 and ended the year with $5.3 billion in cash. Moreover, it also returned $4.1 billion to shareholders, including $1.6 billion in dividends. This showed the company’s commitment to returning value to shareholders.
On February 26, The TJX Companies, Inc. (NYSE:TJX) declared a 13.3% growth in its quarterly dividend to $0.425 per share. This was the company’s 28th consecutive year of dividend growth, which makes TJX one of the best dividend stocks in the retail sector. The stock offers a dividend yield of 1.27%, as of March 29.
3. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Holders: 88
The Home Depot, Inc. (NYSE:HD) ranks third on our list of the best dividend stocks in the retail sector. The American home improvement company offers tools, appliances, construction products, and related services. It caters to both DIY enthusiasts and professionals. The company operates through physical stores and online channels. On March 19, the company became the sole big-box retailer for KILZ primer products in the US and Puerto Rico, further solidifying its collaboration with Behr Paint. This initiative enhances product availability for professionals, ensuring easier access to reliable primers in stores, online, and via delivery services.
In the fourth quarter of 2024, The Home Depot, Inc. (NYSE:HD) reported revenue of $39.7 billion, which saw a 14% growth from the same period last year. For the fiscal year 2025, the company forecasts a total sales increase of approximately 2.8%, with comparable sales expected to rise by around 1% over the same 52-week period. Additionally, plans are in place to expand its presence with roughly 13 new store openings, while the gross margin is projected to be around 33.4%.
The Home Depot, Inc. (NYSE:HD) closed the quarter with more than $1.65 billion in cash and cash equivalents. Throughout FY24, the company generated nearly $20 billion in operating cash flow, highlighting its strong financial position. This stability has allowed it to sustain an uninterrupted streak of dividend payments for 152 consecutive quarters. On February 25, the company raised its dividend by 2.2% to $2.30 per share, marking its 15th consecutive year of dividend growth. The stock supports a dividend yield of 2.57%, as of March 29.
2. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Holders: 96
Costco Wholesale Corporation (NASDAQ:COST) is a Washington-based retail company that operates membership-only big box warehouse club stores. The company stands out as one of the most resilient retailers in the industry, with membership fees playing a crucial role in its profitability. In FY24, the company generated $4.8 billion from these fees. Recently, it raised its base membership fee to $65, a change that will be reflected in the current fiscal year’s earnings. Moreover, its number of paid members has grown by 7% annually over the past two years.
In fiscal Q1 2025, Costco Wholesale Corporation (NASDAQ:COST) posted $62 billion in revenue, reflecting a 7.5% year-over-year increase. Net income grew to $1.8 billion, up from $1.6 billion in the same period last year. The company maintained solid liquidity, ending the quarter with nearly $11 billion in cash and equivalents, an increase from $9.9 billion in the previous quarter. In addition, it generated $3.3 billion in operating cash flow.
This strong cash position makes Costco Wholesale Corporation (NASDAQ:COST) one of the best dividend stocks. The company’s quarterly dividend comes in at $1.16 per share for a dividend yield of 0.50%, as of Marh 29. It holds a 10-year track record of dividend growth, providing income opportunities to investors.
1. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 116
Walmart Inc. (NYSE:WMT) is an American retail corporation that operates a chain of hypermarkets, discount stores, and grocery stores across the US.
In December 2024, Walmart Inc. (NYSE:WMT) finalized its $2.3 billion acquisition of VIZIO, integrating the SmartCast Operating System into its ecosystem. This move enhances Walmart’s ability to improve customer shopping experiences while providing advertisers with additional opportunities through Walmart Connect. VIZIO’s strong advertising business, with over 19 million active accounts, further strengthens this initiative.
In fiscal Q4 2024, Walmart Inc. (NYSE:WMT) reported a 4.1% increase in revenue, reaching $180.6 billion, with constant currency growth of 5.3%. Operating income rose by 8.3%, supported by improved gross margins, higher membership revenue, and stronger eCommerce profitability. For the full fiscal year, the company generated $36.4 billion in operating cash flow and closed the year with $9 billion in cash and equivalents. In addition, Walmart repurchased $4.5 billion in shares and announced a 13% increase in its quarterly dividend to $0.235 per share, which was the company’s largest boost in over a decade.
Walmart Inc. (NYSE:WMT) currently offers a quarterly dividend of $0.235 per share, growing it by 13% in February. This marked the company’s 52nd consecutive year of dividend growth. The stock has a dividend yield of 1.10%, as of March 29.
Overall, Walmart Inc. (NYSE:WMT) ranks first on our list of the best dividend stocks in the retail sector. While we acknowledge the potential of WMT as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued dividend stock that is more promising than WMT but that trades at 10 times its earnings and grows its earnings at double digit rates annually, check out our report about the dirt cheap dividend stock.
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