GAP (NYSE:GPS) is one of the largest retailers in the United States. Like many of its peers, GAP has struggled in the face of headwinds in the volatile environment for retail. Shares have dropped 29.6% in 2019 as of close on November 25.
Some investors may not know about the stock’s attractive dividend. The stock last paid out a quarterly dividend of $0.243 per share. This represents a 5.6% yield. Is it worth picking up GAP at its price levels? Let’s take a quick snapshot and find out.
Earlier this month the company announced the resignation of chief executive Art Peck. It warned that its profits would fall below its original forecasts for the full year. Declining mall traffic and the shift to online shopping has compounded its problems into 2019.
Comparable sales fell 4% year-over-year in the third quarter. Analysts had expected adjusted earnings per share around $2.07 for the fiscal year. GAP reduced its full-year adjusted earnings per share forecast to between $1.70 and $1.75.
What is more alarming is that this is in a period in which the United States has reported strong consumer confidence. U.S. GDP growth is forecast to slow in 2020 and 2021, so retailers could be in for a bumpy ride to start the next decade.
GAP stock has not scratched technically oversold territory after this adjusted forecast. Its price-to-earnings ratio is a solid 8 and its price-to-book sits below 1 at the time of this writing. Still, I don’t love the dividend enough to dip into GAP in this shaky retail environment.