JB Hi-Fi Limited (ASX: JBH) and Super Retail Group Ltd (ASX: SUL) are two well-known specialty retailers and have been good performers over the long term.
But which one might be a better pick for potential earnings growth and dividend income?
Let's put them to the test and see what the results may tell us.
— Earnings growth
JB Hi-Fi has raised annual earnings per share (EPS) in 9 of the past 10 years. EPS has gone from 19.8 cents per share to 126.9 cps, or about an average annual 23%.
Super Retail Group grew EPS in 7 of the past 10 years for an average annual 15%.
In the latest half-year results, JB Hi-Fi interim net profit was down 1.9%.
Super Retail had a 45% drop in reported net profit after business restructuring costs. Before restructuring costs, underlying net profit was down only 5.7%
JB Hi-Fi performed better in a tough retail environment for both of them.
— Dividend yield
JB Hi-Fi currently offers a 4.8% fully franked yield, versus Super Retail's 4.2% fully franked yield. JB Hi-Fi pays shareholders a little more in yield, yet over the long term, dividend growth is also important for growing portfolio income.
— Dividend growth
Super Retail has almost doubled its annual dividend in the last five years for an average annual 18.5%. Over the same time, JB Hi-Fi raised its dividend only 27%, or an average 6.2% annually. Super Retail has grown more by acquisition in recent years, so earnings and dividends have increased faster.
— Analyst forecasts
The economy is still sluggish and retail trade is not robust. In such a business climate, same store sales can weaken for retailers.
Over the next few years, analysts forecast Super Retail will grow earnings an average 9% annually.
On the other side, JB Hi-Fi is expected to raise earnings an average 4.4% annually.
JB Hi-Fi should benefit from a growing housing market, yet if consumers have more disposable income from interest rate cuts, Super Retail's lower priced goods can see higher demand.
The verdict?
There's no clear, one-sided winner here. Super Retail has businesses in auto accessories, sports apparel and outdoor activity equipment. JB Hi-Fi has recently expanded into home appliances and white goods. However, I believe Super Retail Group edges out JB Hi-Fi for better growth and dividend income over the long term.
