Department store giant Kohl’s (NYSE: KSS) stock performance over the last three years shows how important it is for investors to periodically assess a company’s long-term prospects. You should also periodically check how a company is progressing to see if you should give up and instead invest in a stock with better prospects.
If you made a $5,000 investment in Kohl’s shares three years ago, you’d have a lot less money today.
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Dwindling wealth
Kohl’s stock price closed at $8.12 on June 13 compared to $40.54 three years ago. That works out to a stock-price loss of 80%. During this time, the S&P 500 index gained 60%. Investing $5,000 then means you would have purchased 123 shares in June 2022. Those shares have a value of about $1,000 today.
You would have also collected dividends during those three years. These payments were $0.50 per share per quarter until the board of directors slashed the latest per-share payout to $0.125 (or $0.50 annually). That means you would have collected a little under $700 in dividends.
That leaves you a paltry $1,700 in total return for your initial $5,000 investment. By contrast, investing that same amount in the S&P 500 index means you’d have nearly $8,400 today.
Challenges ahead
When companies cut dividends, it’s often a sign that things aren’t going well for the company. That’s the case with Kohl’s. Kohl’s, operating in the competitive retail industry, has continued to face challenges in growing its sales. In fact, same-store sales (comps) keep dropping. Fiscal first-quarter comps fell 3.9% in the period ended on May 3. It doesn’t expect them to pick up anytime soon, with management projecting a 4% to 6% drop this year.
The company estimates it will earn $0.10 to $0.60 per share in 2025, which might not cover the new $0.50 annual dividend.
Kohl’s share price performance and lower dividends are clear warning signs to stay away from the stock right now.
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Lawrence Rothman, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
