CATO - Don't Get Fooled By Cato's Dividend
2024-06-09 21:08:23 ET
Summary
- Cato operates as a value-based specialty retailer in the United States, but global fast fashion powerhouses' competition has deteriorated the company's demand in the past decade.
- The company continues to close stores, but earnings are left negative with no likely recovery in sight as revenue declines continue.
- Cato's balance sheet allows for a high current dividend yield, but as the cash dwindles, the dividend is on an unsustainable basis due to constant negative cash flows.
- An asset sale or brand turnaround could create significant upside, but I see both events as very unlikely, making the stock likely an incredibly weak investment.
The Cato Corporation ( CATO ) operates as a value-based specialty retailer, operating primarily in the southeastern part of the United States. The company offers apparel and accessories such as sportswear, dresses, shoes, lingerie, and handbags with a focus on women’s products. Cato sells through brick-and-mortar stores and ecommerce stores. The company also provides credit cards for customers, representing a small finance segment....
Don't Get Fooled By Cato's Dividend