Best Dividend Stocks. Analyze the stocks with the best dividend, while also showing decent profitability and health.


BEST BUY CO INC

New York Stock Exchange, Inc. / Consumer Discretionary / Specialty Retail

Fundamental Rating

6

We assign a fundamental rating of 6 out of 10 to BBY. BBY was compared to 125 industry peers in the Specialty Retail industry. BBY has an excellent profitability rating, but there are some minor concerns on its financial health. BBY has a correct valuation and a medium growth rate. Finally BBY also has an excellent dividend rating. These ratings could make BBY a good candidate for dividend investing.



7

1. Profitability

1.1 Basic Checks

In the past year BBY was profitable.
BBY had a positive operating cash flow in the past year.
Each year in the past 5 years BBY has been profitable.
Each year in the past 5 years BBY had a positive operating cash flow.

1.2 Ratios

BBY has a Return On Assets of 8.29%. This is in the better half of the industry: BBY outperforms 77.78% of its industry peers.
BBY has a Return On Equity of 40.65%. This is amongst the best in the industry. BBY outperforms 90.48% of its industry peers.
The Return On Invested Capital of BBY (19.06%) is better than 88.89% of its industry peers.
BBY had an Average Return On Invested Capital over the past 3 years of 25.19%. This is significantly above the industry average of 13.93%.
The 3 year average ROIC (25.19%) for BBY is well above the current ROIC(19.06%). The reason for the recent decline needs to be investigated.
Industry RankSector Rank
ROA 8.29%
ROE 40.65%
ROIC 19.06%
ROA(3y)10.43%
ROA(5y)10.12%
ROE(3y)57.56%
ROE(5y)51.23%
ROIC(3y)25.19%
ROIC(5y)24.01%

1.3 Margins

BBY has a better Profit Margin (2.86%) than 63.49% of its industry peers.
In the last couple of years the Profit Margin of BBY has declined.
The Operating Margin of BBY (3.97%) is comparable to the rest of the industry.
BBY's Operating Margin has declined in the last couple of years.
BBY has a worse Gross Margin (22.10%) than 77.78% of its industry peers.
In the last couple of years the Gross Margin of BBY has remained more or less at the same level.
Industry RankSector Rank
OM 3.97%
PM (TTM) 2.86%
GM 22.1%
OM growth 3Y-10.12%
OM growth 5Y-2.87%
PM growth 3Y-9.11%
PM growth 5Y-3.51%
GM growth 3Y-0.48%
GM growth 5Y-0.99%

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5

2. Health

2.1 Basic Checks

BBY has a Return on Invested Capital (ROIC), which is well above the Cost of Capital (WACC), which means it is creating value.
The number of shares outstanding for BBY has been reduced compared to 1 year ago.
The number of shares outstanding for BBY has been reduced compared to 5 years ago.
The debt/assets ratio for BBY is higher compared to a year ago.

2.2 Solvency

BBY has an Altman-Z score of 4.33. This indicates that BBY is financially healthy and has little risk of bankruptcy at the moment.
With an excellent Altman-Z score value of 4.33, BBY belongs to the best of the industry, outperforming 83.33% of the companies in the same industry.
BBY has a debt to FCF ratio of 1.73. This is a very positive value and a sign of high solvency as it would only need 1.73 years to pay back of all of its debts.
BBY has a better Debt to FCF ratio (1.73) than 73.81% of its industry peers.
A Debt/Equity ratio of 0.38 indicates that BBY is not too dependend on debt financing.
BBY has a Debt to Equity ratio (0.38) which is in line with its industry peers.
Industry RankSector Rank
Debt/Equity 0.38
Debt/FCF 1.73
Altman-Z 4.33
ROIC/WACC2.19
WACC8.71%

2.3 Liquidity

BBY has a Current Ratio of 1.00. This is a bad value and indicates that BBY is not financially healthy enough and could expect problems in meeting its short term obligations.
With a Current ratio value of 1.00, BBY is not doing good in the industry: 79.37% of the companies in the same industry are doing better.
A Quick Ratio of 0.37 indicates that BBY may have some problems paying its short term obligations.
BBY's Quick ratio of 0.37 is on the low side compared to the rest of the industry. BBY is outperformed by 67.46% of its industry peers.
Industry RankSector Rank
Current Ratio 1
Quick Ratio 0.37

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4

3. Growth

3.1 Past

BBY shows a strong negative growth in Earnings Per Share. In the last year the EPS decreased by -10.14%.
The Earnings Per Share has been growing slightly by 3.47% on average over the past years.
The Revenue has decreased by -6.15% in the past year.
Measured over the past years, BBY shows a small growth in Revenue. The Revenue has been growing by 0.27% on average per year.
EPS 1Y (TTM)-10.14%
EPS 3Y-6.95%
EPS 5Y3.47%
EPS growth Q2Q4.21%
Revenue 1Y (TTM)-6.15%
Revenue growth 3Y-2.76%
Revenue growth 5Y0.27%
Revenue growth Q2Q-0.6%

3.2 Future

BBY is expected to show quite a strong growth in Earnings Per Share. In the coming years, the EPS will grow by 12.98% yearly.
The Revenue is expected to grow by 1.24% on average over the next years.
EPS Next Y-4.44%
EPS Next 2Y3.24%
EPS Next 3Y6.77%
EPS Next 5Y12.98%
Revenue Next Year-3.1%
Revenue Next 2Y-0.55%
Revenue Next 3Y0.56%
Revenue Next 5Y1.24%

3.3 Evolution

The EPS growth rate is accelerating: in the next years the growth will be better than in the last years.
When comparing the Revenue growth rate of the last years to the growth rate of the upcoming years, we see that the growth is accelerating.

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6

4. Valuation

4.1 Price/Earnings Ratio

The Price/Earnings ratio is 11.50, which indicates a very decent valuation of BBY.
80.16% of the companies in the same industry are more expensive than BBY, based on the Price/Earnings ratio.
BBY's Price/Earnings ratio indicates a rather cheap valuation when compared to the S&P500 average which is at 28.60.
Based on the Price/Forward Earnings ratio of 12.03, the valuation of BBY can be described as correct.
Based on the Price/Forward Earnings ratio, BBY is valued a bit cheaper than 79.37% of the companies in the same industry.
BBY is valuated rather cheaply when we compare the Price/Forward Earnings ratio to 20.15, which is the current average of the S&P500 Index.
Industry RankSector Rank
PE 11.5
Fwd PE 12.03

4.2 Price Multiples

80.95% of the companies in the same industry are more expensive than BBY, based on the Enterprise Value to EBITDA ratio.
Based on the Price/Free Cash Flow ratio, BBY is valued a bit cheaper than the industry average as 61.90% of the companies are valued more expensively.
Industry RankSector Rank
P/FCF 23.4
EV/EBITDA 5.86

4.3 Compensation for Growth

BBY has a very decent profitability rating, which may justify a higher PE ratio.
PEG (NY)N/A
PEG (5Y)3.31
EPS Next 2Y3.24%
EPS Next 3Y6.77%

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7

5. Dividend

5.1 Amount

With a Yearly Dividend Yield of 5.11%, BBY is a good candidate for dividend investing.
Compared to an average industry Dividend Yield of 3.25, BBY pays a better dividend. On top of this BBY pays more dividend than 96.03% of the companies listed in the same industry.
BBY's Dividend Yield is rather good when compared to the S&P500 average which is at 2.32.
Industry RankSector Rank
Dividend Yield 5.11%

5.2 History

On average, the dividend of BBY grows each year by 15.34%, which is quite nice.
BBY has been paying a dividend for at least 10 years, so it has a reliable track record.
BBY has not decreased its dividend in the past 5 years, so it has a somewhat stable track record.
Dividend Growth(5Y)15.34%
Div Incr Years6
Div Non Decr Years6

5.3 Sustainability

64.54% of the earnings are spent on dividend by BBY. This is not a sustainable payout ratio.
BBY's earnings are growing slower than its dividend. This means the dividend growth is not sustainable.
DP64.54%
EPS Next 2Y3.24%
EPS Next 3Y6.77%

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