Should JB Hi-Fi Limited be on your Christmas shopping list?

It’s been a tough year for shareholders of one of Australia’s most beloved retailers, JB Hi-Fi Limited (ASX: JBH).

Following on from a stunning 18-month run between mid-2012 and the end of 2013 which saw the stock surge 187% (plus dividends), JB Hi-Fi shares have since retreated nearly 32% to be trading at $15.38. That puts them on a projected P/E ratio of 11.7 times earnings, and a projected 5.6% dividend yield, fully franked.

While the stock’s performance has been hindered by shaky consumer confidence, fears of slowing earnings growth and rising levels of online competition, there are a number of reasons why JB Hi-Fi could return to the winners’ board in 2015 – in a big way.

The outlook

JB Hi-Fi could be amongst the biggest beneficiaries if the Reserve Bank does decide to cut its interest rates. With inflation in check, unemployment rising and commodity prices tumbling, the RBA could be forced to cut the nation’s official cash rate, possibly even as low as 2%. This would likely spark an upswing in consumer spending which could improve the revenues of discretionary retail companies like JB Hi-Fi and even Harvey Norman Holdings Limited (ASX: HVN).

In such an event, it’s also likely that investors would turn to JB Hi-Fi for its compelling dividend yield, as attested to above.

Investors also need to consider the company’s new ‘HOME’ format stores, which continue to be rolled out across the country. With 22 stores opened as at 30 June 2014, a further 53 are expected to be open by the end of FY15. This represents a huge growth opportunity for JB Hi-Fi and its shareholders.

As appealing as JB Hi-Fi is however, there’s another Australian retailer which is shaping up as an even better buy right now (hint: it offers an even better dividend than JB Hi-Fi as well)!

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

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