Five Best Brick-and-Mortar Retail Stocks to Buy for Dividend Income

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High Dividend Stocks

Five best brick-an-mortar retail stocks to buy for dividend income feature well-known names that should outperform their rivals during the holiday season and well into 2022.

The five best brick-and-mortar retail stocks to buy for dividend income include market leaders in specialty, home improvement, discount and restaurant business segments. Those five brick-and-mortar retail stocks to buy for dividend income and share-price appreciation during upcoming holiday shopping season and beyond  are expected to grow strongly, according to BofA Securities.

Unlike last year when COVID-19 concerns caused many shoppers to avoid brick-and-mortar stores and malls, the latest holiday gift-buying season should produce increases in comparable sales and profits for most categories as comfort with in-person shopping gains momentum, BofA wrote in a recent research note. Even though many consumers are shopping in stores again, BofA forecasts an increased preference for gift cards — both physical and digital — by those who are hesitant to do so as COVID-19 cases and deaths still pose a threat.


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Five Brick-and-Mortar Retail Stocks to Buy for Dividend Income from Secular Growth

BofA projects that comparable holiday sales-weighted average should rise 4.9% year over year (y/y), or 5.1% when factoring out Walmart (NYSE: WMT), which accounts for 30% of total group sales in the investment firm’s spectrum of retail coverage. Store capacity limits, reduced store hours and stay-at-home mandates across many regions of the United States hurt sales last year but those effects should be lessened this year, BofA wrote.

“Many investors who don’t delve into the details of how S&P classifies stocks can miss opportunities,” said Bob Carlson, head of the Retirement Watch investment newsletter. “Investing in retailers is one case.”


Many firms that investors may view as retailers are classified in the Consumer Discretionary sector by S&P, continued Carlson, who serves as chairman of the Board of Trustees of Virginia’s Fairfax County Employees’ Retirement System with more than $4 billion in assets. One way that Carlson recommends investing in the sector is to buy the exchange-traded fund (ETF) iShares U.S. Consumer Discretionary (IYC).

The biggest position in IYC is Amazon (NASDAQ: AMZN), which is 13.48% of the fund, Carlson said. Other large holdings and their weightings in the fund are Tesla (NASDAQ: TSLA; 9.40%), Home Depot (NASDAQ: HD; 4.49%), Walt Disney (NYSE: DIS; 4.06%), and Netflix (NASDAQ: NFLX; 3.92%), Carlson said. Other companies that compose the 10 largest positions in IYC and are likely to benefit from a strong retail season are Costco Wholesale Corp. (NASDAQ: COST), Nike Inc. (NYSE: NKE), Walmart (NYSE: WMT) and Lowe’s Companies (NYSE: LOW).

Retirement Watch chief Bob Carlson talks to Paul Dykewicz.

Five Brick-and-Mortar Retail Stocks to Buy for Dividend Income: Bath & Body Works

In the specialty retail category, BofA’s No. 1 choice is Bath & Body Works (BBWI), an “undervalued” growth company headquartered in Reynoldsburg, Ohio. BBWI is viewed by BofA as offering “strong demand” amid the resumption of buying gifts for school teachers, as well as the retailer’s domestic manufacturing having limited supply-chain risk.

BBWI received a “Buy” recommendation and a $90 price objective from BofA. The investment firm described Bath & Body Works as one of the best positioned retailers for the holiday season and in 2022.

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The stock currently trades at a discount to both makeup and personal care peers, while offering one of the most consistent growth stories in retail with room for upward estimate revisions, BofA wrote. A return to normalized gift giving will aid demand for candles, lotions and gift packs, the investment firm opined.

BBWI’s mostly domestic supply chain accounts for more than 90% of its total goods, insulating it from the factory shutdowns and delays in international shipping that are putting other retailers’ deliveries at risk, BofA wrote. Plus, BBWI’s only imports are packaging components, such as candle lids and soap pumps, which are made in China.

This reduced risk positions BBWI to gain market share during the holiday, if delays hamper the deliveries of other goods. After benefiting from COVID-19 demand, second-half comparisons will be tough, but BofA estimates more normalized sales growth through fiscal year 2023 at 7%.

Five Brick-and-Mortar Retail Stocks to Buy for Dividend Income includes Lowe’s

Home improvement company Lowe’s wields increased negotiating power with suppliers and transportation partners compared to smaller home improvement retailers, according to BofA. The investment firm estimates that LOW is sufficiently stocked for the holiday season given that the company has been building up its inventory levels in recent quarters.

“The ongoing industry-wide supply chain issues are unlikely to pose serious threats to LOW given that its overseas exposure is small,” BofA wrote. “As a big-box retailer, LOW has more negotiating power with suppliers and transportation partners compared to smaller scale retailers in the home improvement sector.”

Seasoned stock picker Jim Woods, leader of the Intelligence Report and Successful Investing newsletters, as well as the Bullseye Stock Trader advisory service, includes Mooresville, North Carolina-based Lowe’s among the recommendations in his Intelligence Report Income Multipliers portfolio. The stock has been a profitable pick for his subscribers.

Paul Dykewicz interviews Jim Woods, who recommends Lowe’s in the Intelligence Report newsletter.

Home improvement spending is growing at solid double-digit-percentage levels vs. 2019, according to BAC’s aggregated credit and debit card data, well beyond BofA’s expectations. LOW, a “Buy” recommendation of BofA with a $281 price objective, recently launched a kitchen design program and completed the migration of “Lowe’s For Pros” to the cloud in second-quarter 2021, the investment firm noted.

“We believe the company will be able to leverage the enhanced omni-channel capabilities to better fulfill consumer demand this holiday season,” BofA wrote.

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Five Brick-and-Mortar Retail Stocks to Buy for Dividend Income: Walmart and Target

BofA’s two top choices in the discount retail sector are Walmart and Target (NYSE: TGT) due to their strong inventory positions, favorable port access, long-term container shipping agreements and chartered vessel capacity, according to BofA. Both WMT and TGT, while not immune to the challenging supply chain and rising cost environment, are well positioned relative to the broader competitive retail landscape going into the holidays, the investment firm concluded.

Walmart, of Bentonville, Arkansas, and Target, of Minneapolis, Minnesota, should gain share from smaller competitors that lack scale and face more shortages due to the challenging supply-chain environment, BofA wrote. The big discount retailers also should see reduced labor cost pressure and shortages, after giving workers “significant wage increases” in the last year-and-a-half, BofA opined.

Both Walmart and Target keep taking share in the Food Retail sector, with Nielsen trends shifting in favor of the two companies since March. BofA wrote that the pair should benefit from omni-channel leadership, which could be a big advantage this holiday season if shipping cut-off dates are moved up earlier due to a challenging freight and logistics environment for pure online retailers. BofA gave both big discount retailers “Buy” recommendations, while offering price objectives of $190 for Walmart and $317 for Target.

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Starbucks Rates With Five Brick-and-Mortar Retail Stocks to Buy for Dividend Income

The top restaurant stock of BofA is Starbucks (NASDAQ: SBUX), of Seattle, Washington, whose high gift card sales should spur robust demand. That sweet outlook led BofA to give SBUX a “Buy” rating and a price objective of $135.

Starbucks is gaining demand in its stores across all geographies – even as COVID continues to limit consumer mobility, according to BofA. The company’s momentum should continue through the holidays on the strength of demand for new and returning seasonal beverages, as well as Starbucks’ brand building and transaction-focused marketing programs, the investment firm opined.

“We believe SBUX is positioned to benefit from increased interest in gift cards as it leverages digital and out-of-store channels and creates a promotional presence in the drive-through lanes that, along with Mobile Order & Pay, account for 70% of transactions,” BofA wrote. “While Starbucks faces supply-chain pressures, it has added new manufacturing and supply partners and is seeing inventory constraints ease in key categories.”

Those key categories include plant-based milk, as suppliers build production capacity. Given accelerating topline growth and considerable “latent pricing power,” Starbucks’ price hikes have meaningfully lagged the industry’s roughly 5% climb. Starbucks has the clout to offset margin pressure from supply chain and labor, suggesting its management’s margin guidance is likely to prove conservative, BofA noted.

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Amazon Omitted From Five Brick-and-Mortar Retail Stocks to Buy for Dividend Income

Internet retail giant Amazon (NASDAQ: AMZN) does not pay a dividend but its increasing investments in fulfillment and shipping should mitigate supply chain bottlenecks, according to BofA. Even though Amazon’s growth has slowed in 2021 and competitive concerns have mounted as Amazon is accelerating investment in one-day shipping, the online retailer is gaining U.S. ecommerce market share, according to BAC card spending data.

In 2022, BofA expects easier y/y comparisons, improving product availability and reduced shipping times after its investments in fulfillment to support stepped-up growth. Amazon’s cloud business also is market leading. Based on a sum of parts model, BofA projects Amazon’s upside potential may top $4,500. Officially, BofA rates Amazon as a “Buy” and gave it a price objective of $4,250.

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Five Brick-and-Mortar Retail Stocks to Buy for Dividend Income Keep Supply Chains Intact

The retail industry has faced significant supply-chain headwinds in recent quarters. Freight costs are at record levels, as much as 200%-plus beyond pre-pandemic perches, with consumer demand outstripping available fleets. In addition, port congestion is delaying delivery and Vietnam factory closures have curbed production, BofA reported.

Expect these headwinds to worsen in the second half of the year, BofA commented. Restaurants likewise face commodity inflation, with many retailers and restaurants adjusting prices upward and limiting promotions to account for the scarcity of goods and increased freight and labor costs.

“Decreased promotional activity and more full-price sell-through should serve to offset cost increases in most cases,” BofA wrote.

BAC’s aggregated credit and debit card data showed that spending stayed positive across all income cohorts. A declining savings rate and increasing revolving credit could suggest growing consumer willingness to spend and borrow going into the holiday season. Despite robust spending, the elevated Consumer Price Index, as well as higher gas prices, could limit overall volumes this holiday season as purchasing power declines, BofA commented.

COVID Will Not Ruin Christmas for Five Brick-and-Mortar Retail Stocks to Buy for Dividend Income

The highly transmissible Delta variant of COVID-19 has led to reduced numbers of cases and deaths in the United States recently but it remains a worry for public health experts who still are pleading with the public to increase vaccinations and booster shots, as well wear masks. The Centers for Disease Control and Prevention (CDC) blamed the variant for unleashing a resurgence of cases and deaths early in the fall.

However, the variant seems to have spurred a rise in the number of people vaccinated from COVID-19. As of Nov. 12, 225,606,197 people, or 68% of the U.S. population, have received at least one dose of a COVID-19 vaccine, the CDC reported. The fully vaccinated total 194,747,839 people, or 58.7%, of the U.S. population, according to the CDC.

COVID-19 deaths worldwide, as of Nov. 12, topped the 5 million mark, reaching 5,087,235, according to Johns Hopkins University. Worldwide COVID-19 cases topped 250 million, hitting 252,437,183, as of that date.

U.S. COVID-19 cases, as of Nov. 9, reached 46,974,950 and caused 757,181 deaths. America has the dreaded distinction as the nation with the most COVID-19 cases and deaths.

The five brick-and-mortar retail stocks to buy for dividend income and share-price appreciation should give investors yuletide spirit to overcome the pandemic and deliver glad tidings in the coming months.

Paul Dykewicz

Connect with Paul Dykewicz

Paul Dykewicz

Paul Dykewicz,, is a respected, award-winning journalist who has written for Dow Jones, the Wall Street JournalInvestor’s Business DailyUSA Today, the Journal of Commerce, Crain Communications, Seeking Alpha, Guru Focus and other publications and websites. Paul can be followed on Twitter @PaulDykewicz, and is the editor and a columnist at and He also serves as editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free weekly e-letters and other investment reports.

Paul is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. In addition, Paul serves as a commentator about investing, economics, business news, politics and motivational guidance. 

Paul earned a master’s degree in business administration with a focus on finance at Baltimore’s Johns Hopkins University, where he was elected to two terms as president of its Finance Club. He earlier received a master’s degree from Michigan State University’s School of Journalism, where he was inducted into the Kappa Tau Alpha honor society. Paul received a bachelor’s degree from the University of Michigan in Ann Arbor, focusing on political science, business and economics.

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