S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
Latest freight railroad layoffs and Wall Street pressure renew concerns about safety and service
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
One year after buying a failed bank, New York Community Bancorp is struggling
Dell, NetApp rise; Ginkgo Bioworks, New York Community Bancorp fall, Friday, 3/1/2024
Critical asset just had biggest fall on record (Ad)
How major US stock indexes fared Friday, 3/1/2024
China pledges to increase opportunities for foreign companies as it seeks to boost its economy
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Brazil's economy grows 2.9% in Lula's 1st year, beating expectations
A US appeals court ruling could allow mine development on Oak Flat, land sacred to Apaches
S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
Latest freight railroad layoffs and Wall Street pressure renew concerns about safety and service
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
One year after buying a failed bank, New York Community Bancorp is struggling
Dell, NetApp rise; Ginkgo Bioworks, New York Community Bancorp fall, Friday, 3/1/2024
Critical asset just had biggest fall on record (Ad)
How major US stock indexes fared Friday, 3/1/2024
China pledges to increase opportunities for foreign companies as it seeks to boost its economy
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Brazil's economy grows 2.9% in Lula's 1st year, beating expectations
A US appeals court ruling could allow mine development on Oak Flat, land sacred to Apaches
S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
Latest freight railroad layoffs and Wall Street pressure renew concerns about safety and service
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
One year after buying a failed bank, New York Community Bancorp is struggling
Dell, NetApp rise; Ginkgo Bioworks, New York Community Bancorp fall, Friday, 3/1/2024
Critical asset just had biggest fall on record (Ad)
How major US stock indexes fared Friday, 3/1/2024
China pledges to increase opportunities for foreign companies as it seeks to boost its economy
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Brazil's economy grows 2.9% in Lula's 1st year, beating expectations
A US appeals court ruling could allow mine development on Oak Flat, land sacred to Apaches
S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
Latest freight railroad layoffs and Wall Street pressure renew concerns about safety and service
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
One year after buying a failed bank, New York Community Bancorp is struggling
Dell, NetApp rise; Ginkgo Bioworks, New York Community Bancorp fall, Friday, 3/1/2024
Critical asset just had biggest fall on record (Ad)
How major US stock indexes fared Friday, 3/1/2024
China pledges to increase opportunities for foreign companies as it seeks to boost its economy
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Brazil's economy grows 2.9% in Lula's 1st year, beating expectations
A US appeals court ruling could allow mine development on Oak Flat, land sacred to Apaches

You should read this if your portfolio could use a 4.9% dividend

Best Buy stock

Key Points

  • Best Buy is the one consumer stock that fell behind in 2023, but for 2024, the story is about to take a turn.
  • Understanding that issues are industry-wide and not company-specific has led analysts to reward the stock.
  • Its 4.9% dividend will only last for a while, especially now that insiders and smart money are picking up shares.
  • 5 stocks we like better than Best Buy

Do you know what the difference is between buying a ten-year government bond and Best Buy NYSE: BBY? Here's a hint: the ten-year is looking to pay you 4.0% in an annual yield today, while Best Buy is rolling out its annual dividend payments at 4.9%. Everyone knows what that extra bit of yield can do to your wealth if invested for a long enough timeframe.

Of course, the other difference is that investing in a government bond is relatively riskless. Hence, you need to be adequately compensated by taking on a little extra risk when buying a stock. With Best Buy, that extra compensation comes from price appreciation, and unless the market fundamentals have changed, stock prices move in relation to their earnings.

Today, you can take advantage of the gap that is forming between the Consumer Discretionary Select Sector SPDR Fund NYSEARCA: XLY and product-specific stocks like Best Buy, which, in this case, have been negatively affected by the slump in consumer electronics, a trend that is about to change in the coming months.

Comeback season 

The world of consumer discretionary stocks is divided between several industries, which is why understanding the consumer electronics space can help you understand more of what's in store for Best Buy's future. Since the COVID-19 pandemic, a shortage in semiconductors and chips has made it nearly impossible to keep up with new orders in that space.


Best Buy needs to hold and store inventory physically, unlike Amazon.com NASDAQ: AMZN and eBay NASDAQ: EBAY, which aren't affected by changing inventory values as they only act as the middle man. Changing inventory values have recently taken a chunk out of Best Buy's profits, but that's changing soon.

You see, taking the comments from top executives in the computer and electronic products industry can give you a good idea of what is going on as far as supply and demand trends or any issues if they are still persistent today.

Within the ISM Manufacturing PMI report for the month of December, comments have been overall positive, laying out the prediction that demand is about to surge in the coming month's thanks to the FED turning dovish and proposing up to six rate cuts in 2024.

With increased activity and demand comes expanding earnings, and with expanding earnings come higher stock prices, but is Best Buy in the queue to receive its share of this expansion? Here's how to tell.

Down to business

Zooming to Best Buy's latest quarterly results, Corie Barry, the company's CEO, matches the sentiment other top executives laid out in the PMI reports. "Today we are reporting better-than-expected profitability..." you can take this as a sign of the times, as inventories and supply chain situations are improving significantly.

Now that the trends are becoming more apparent across the market, and with potential interest rate cuts coming this year, some analysts are looking at Best Buy as a potential winner to receive some of the rewards that will come in this new money shift in economic policy.

Analysts at Jefferies Financial Group NYSE: JEF are one of the first to jump head-on for this trend, as they have raised their price targets for Best Buy from $69.0 a share up to $89.0 a share, which is not only a bump of 28.9% but also an implied upside of 17.4% from where the stock is trading today.

Because management also knows this trend is growing within the business, they are more than comfortable laying out $201 million in dividends for shareholders for a 4.9% yield to make it clear the comeback is being built soon. More than that, $112 million has been allocated to buying back stock in the past quarter.

Buying back stock can come as a decision from two dynamics. First, management believes that the stock, as it trades today, is undervalued and worth buying back. Second, management expects the stock price to move higher soon, and who better to know than insiders themselves?

Do you know who else is finding value in Best Buy Stock? Invesco NYSE: IVZ, the company's second-largest shareholder, has upped its stake by 8.7% in November. Perhaps the trends will catch up quicker than the market expects. Still, even if it doesn't, a competitive dividend could be enough to justify a potential investment.

→ This is the #1 Stock to Buy for the AI Tidal Wave (From Chaikin Analytics) (Ad)

Should you invest $1,000 in Best Buy right now?

Before you consider Best Buy, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Best Buy wasn't on the list.

While Best Buy currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

Beginners Guide To Retirement Stocks Cover

Click the link below and we'll send you MarketBeat's list of seven best retirement stocks and why they should be in your portfolio.

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Consumer Discretionary Select Sector SPDR Fund (XLY)N/A$185.02+0.3%0.75%N/AHold$0.07
Jefferies Financial Group (JEF)
4.4365 of 5 stars
$41.810.0%2.87%38.01Buy$39.67
Invesco (IVZ)
4.6717 of 5 stars
$15.53+0.8%5.15%-20.99Hold$17.15
Best Buy (BBY)
4.3257 of 5 stars
$77.94-3.6%4.72%13.44Hold$81.67
eBay (EBAY)
3.6683 of 5 stars
$48.05+1.6%2.08%9.20Hold$48.84
Amazon.com (AMZN)
4.8893 of 5 stars
$178.22+0.8%N/A61.46Buy$197.95
Compare These Stocks  Add These Stocks to My Watchlist 

Gabriel Osorio-Mazilli

About Gabriel Osorio-Mazilli

  • gosoriomazzilli@gmail.com

Contributing Author

Value Stocks, Asian Markets, Macro Economics

Experience

Gabriel Osorio-Mazilli has been a contributing writer for MarketBeat since 2023.

Areas of Expertise

Value investing, long/short trading, options, emerging markets

Education

CFA Level I candidate; Goldman Sachs corporate training; independent courses

Past Experience

Analyst at Goldman Sachs, associate at Citigroup, senior financial analyst in real estate


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