Kohl’s Joins Dividend Pressure Buckling Trend (KSS)

Kohl’s Corp. (NYSE: KSS)  has buckled to the pressure to pay a dividend. At the end of January, we highlighted eight non-dividend payers that need to pay dividends.  Kohl’s was among those.

The company’s fourth quarter earnings were up 14% to $1.66 EPS versus a $1.65 Thomson Reuters estimate.  The firm noted that consumers remain cautious on spending and it gave guidance of $0.68 to $0.73 EPS for the first quarter and a 4% to 6% revenue gain to and implied level of $4.2 billion  to $4.28 billion. Kohl’s sees 2011 earnings of $4.05 EPS to $4.25 EPS, which is short of the $4.35 target by Thomson Reuters.   More important is the capital structure announcement in a dividend and a buyback.

Investors have wanted a dividend here.  For the first time in its history, Kohl’s declared a quarterly dividend of $0.25 per common share to be paid on March 30 to all shareholders of record as of March 9. When we first highlighted the need for a Kohl’s dividend, we suggested that Kohl’s consider a 1% yield as it would be enough to get close to rival retailer dividends.  The $0.25 quarterly rate actually is above 1.9% in a dividend yield.

Kohl’s said that its board of directors has also increased its share repurchase authorization by $2.6 billion to $3.5 billion.

The company is still expanding.  It ended the year with 1,089 stores in 49 states.  This includes 30 which were opened in 2010 and one re-opened store with 85 remodels.  The company expects to open about 40 stores and expects to remodel 100 stores this coming year.

Shareholders are reacting very favorably here today.  Shares are up almost 5% at $54.60 after the open, which would probably not have been the case had the dividend and buyback announcement not been made.

JON C. OGG