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The highest-yielding retail stocks on the ASX

Retailing should be a pretty simple business to understand for most investors.

For one, it’s quite easy to wander into any retailer’s store, or visit them online, to see what they sell, what the quality is like, what the customer service is like and many other details that can give you an insight into the company owning the store.

Australian retailers also tend to pay out decent dividends. There’s not much point a retailer keeping tons of cash on their balance sheet when they could be deploying it into new stores, improving the customer service or the supply chain.

These companies are amongst the highest dividend yields in the retail sector.

Company Last Price Market Cap ($m) Yield
Godfreys Group Ltd (ASX: GFY) $0.75  30.2 14.1%
PAS Group Ltd (ASX: PGR) $0.71  97.7 7.8%
Thorn Group Ltd (ASX: TGA) $1.51  237.2 7.6%
Harvey Norman Holdings Limited (ASX: HVN) $5.17  5,751.9 5.8%
Kathmandu Holdings Ltd (ASX: KMD) $1.93  683.3 5.6%
Automotive Holdings Group Ltd (ASX: AHG) $4.31  4,161.0 5.2%
Nick Scali Limited (ASX: NCK) $5.80  469.8 4.7%
Wesfarmers Ltd (ASX: WES) $44.03  49,583.6 4.2%
Reject Shop Ltd (ASX: TRS) $10.78  311.1 4.1%
Adairs Ltd (ASX: ADH) $2.53  419.7 4.1%
Myer Holdings Ltd (ASX: MYR) $1.23  1,011.8 4.0%
Super Retail Group Ltd (ASX: SUL) $10.43  3,860.0 4.0%
Woolworths Limited (ASX: WOW) $22.75  237.0 3.4%
RCG Corporation Limited (ASX: RCG) $1.72 931.0 3.2%
Beacon Lighting Group Ltd (ASX: BLX) $1.66  358.4 2.8%

Source: S&P Global Markets Intelligence

The first thing most investors will want to know is which of these dividend yields is unsustainable?

Godfreys, PAS Group and Thorn Group appear to be paying dividend yields well above the market average. Let’s take a closer look.

Vacuum cleaner retailer Godfreys paid out 11.3 cents in dividends in the 2016 financial year, and with a share price of $75 cents, that equates to a dividend yield of 15%. But the company slashed its final dividend to just 3.8 cents suggesting the current yield is misleading.

PAS Group, a retailer of women’s fashion, paid out 5.2 cents in dividends – fully franked too, for a dividend yield of 7.3% at the current price of 71.5 cents. That appears sustainable, and the company also sold its loss-making Metallicus business last year which could see earnings rise.

Thorn Group has paid consistent dividends at around this level for at least the past few years – so I’d say it too is sustainable.

Foolish takeaway

If you are looking for sustainable dividend yields from a retailer, there appear to be quite a few to select from in the table above.

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Motley Fool writer/analyst Mike King owns shares in Woolworths and Wesfarmers. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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