Cato corp (CATO) 2012 Review

Cato Corp. operates 1,285 women’s fashion specialty retail stores in SE US offering apparel, accessories, shoes, lingerie, costume jewelry and handbags mostly under its private label.  The company has grown profits and dividends 7-13% over the past 10 years earning a 12-15% return on equity.  CATO was not immune to the declines in consumer spending in 2007-2008; however, as the economy has improved, it has benefited from:

(1) aggressive cost controls,

(2) lean inventory management,

(3) continuing to expand geographically,

Negatives:

(1) uncertain economic environment,

(2) declining growth of same store sales,

CATO is rated B++ by Value Line, has no debt and its stock yields 4.3%.

  Statistical Summary

                 Stock       Dividend         Payout      # Increases  
                 Yield      Growth Rate     Ratio       Since 2003

CATO        4.3%          8%                 62%               9
Ind Ave      1.8            12*                  32                NA

                  Debt/                    EPS Down       Net        Value Line
                 Equity      ROE      Since 2003     Margin       Rating

CATO        0%           14%             3               6%           B++
Ind Ave      9              17               NA             6             NA

*many companies in CATO’s industry do not pay a dividend

     Chart

Note: CATO stock made good initial progress of its November 2008 low, quickly surpassing the downtrend off its July 2007 high (red line) and the November 2008 trading high (green line).  Long term, the stock is in a trading range (straight blue line is upper boundary; the lower boundary is not visible on this chart).  Intermediate term, it is a trading range (purple line is the lower boundary; the upper boundary is the same as that of the long term trading range).  The wiggly blue line is on balance volume.  The High Yield Portfolio owns a 50% position in CATO.  The upper boundary of its Buy Value Range is $22; the lower boundary of its Sell Half Range is $48.

 

http://finance.yahoo.com/q?s=CATO
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