With the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) down 8.65% in the past 30 days, few companies or industries have been spared in the sell-off. As perhaps might be suspected, the highest quality non-discretionary retailers, with defensive characteristics which make their earnings streams less vulnerable to economic weakness, have seen their share prices fall less than many of their discretionary retailing counterparts.
Wesfarmers (ASX: WES), which owns Coles, Target, Kmart, Officeworks and Bunnings, along with Woolworths (ASX: WOW), which not only owns the supermarket chain which bears its name but also Big W, Masters and Dan Murphy's, are two such defensive companies. While their businesses are not completely protected from economic weakness, their food, liquor and petrol retailing businesses largely are.
Wesfarmers' and Woolworths' share prices have fallen 10% and 7% respectively (as the chart below shows). These falls have seen their price-to-earnings multiples decrease to 20 times and 17.75 times respectively, which does not appear overly expensive considering the quality of the assets. They also boast trailing yields of 4.45% and 4.4% respectively.
While the share price declines of these two giants of Australian retailing have made them more appealing, there may be even better propositions available. Competitor Metcash (ASX: MTS), which owns the IGA supermarket banner, has seen its shares drop over 14%, making its performance more akin to the discretionary retail sector. Of note, Metcash's shares are currently priced on a trailing dividend yield of 7.95%
Moving on to the discretionary retailers, department store retailer Myer (ASX: MYR), which is currently conducting its winter stocktake sale, has fallen 17.5% in the past month. Myer's dividend yield is a hefty and appealing 8.4%. Upmarket competitor David Jones (ASX: DJS) has performed relatively better than its rival Myer, with David Jones shares down only 14%.
The market seems to prefer the outlook for David Jones over Myer with the former trading on a price-to-earnings ratio of 14.2 times compared with Myer's 9.5 times. David Jones also has an above average dividend yield of 7% but that's still not as juicy as Myer's.
Source: Google Finance
Foolish takeaway
The recent volatility is creating a number of opportunities for investors. Good quality companies are getting sold down and offering attractive entry prices and high dividend yields for savvy investors.
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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.
