Buy this Cheap Stock for its Dividend Yield and Outlook?
Zacks Investment Research | Nov 24, 2020 09:33PM ET
Ethan Allen (NYSE:ETH) Interiors ETH stock has climbed over 30% in the last three months and the luxury furniture company looks poised to grow as part of a broader U.S. housing boom. The firm also recently raised its dividend and its earnings revisions have trended heavily in the right direction since it reported its quarterly results at the end of October.
Solid Footing…
Ethan Allen is an interior design company, manufacturer, and retailer in the home furnishings space. ETH is coming off a rough stretch and its overall sales fell 21% in fiscal 2020 (period ended on June 30). The coronavirus played a significant role in the decline, with its biggest year-over-year sales drop coming amid the height of the lockdowns.
Things started to turn around last quarter and despite the disappointment, it topped our adjusted earnings estimates in the trailing two periods. Looking ahead, Zacks estimates call for the company’s current quarter (Q2 FY21) sales to pop 4%, with Q3 projected to jump 15%. This is expected to help Ethan Allen post full-year revenue growth of 11% this year to reach $654 million and another 6% next year.
The company’s adjusted earnings are expected to soar 144% this year to hit $1.27 a share, with FY22 projected to come in 12% higher. And ETH’s strong positive bottom-line revisions help it land a Zacks Rank #1 (Strong Buy) at the moment, alongside its “A” grade for Growth and "B' for Value in our Style Scores system.
On top of that, Ethan Allen is part of the Retail - Home Furnishings space that rests in the top 3% of our over 250 Zacks industries at the moment. This group includes WilliamsSonoma TPX , and more.
All of these firms stand to benefit from the continued growth of the housing market that has exploded during the coronavirus, as people look to find more space. It’s also worth noting that the housing market is finally being driven by millennials, which could help make the current growth more sustainable beyond the coronavirus.
In a sign of strength and confidence, Ethan Allen announced on November 12 that is would raise its quarterly cash dividend by 19% to $0.25 per share. The next dividend will be payable on January 21, 2021 to shareholders of record as of January 7. The stock’s dividend yield currently rests at a whopping 5.34%. This blows away the S&P 500 average and the 30-year Treasury that both rest at 1.6%.
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ETH stock jumped over 3% during regular trading Tuesday to $18.74 per share. This is part of a larger climb that’s seen Ethan Allen surge over 60% in the last six months. Overall, ETH is up 6% during the last year, but still rests around 50% below where it was trading in 2016, which could give it more runway.
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