The Gap, Inc. GAP has announced an increase in its first-quarter fiscal 2025 dividend, raising it to 16.50 cents per share from the previous payout of 15 cents. This 10% hike underscores Gap’s commitment to delivering consistent value to its shareholders through dividend payouts.

Scheduled to be paid on or after April 30, 2025, to shareholders of record as of April 9, 2025, this move marks another milestone in Gap’s tradition of rewarding its investors with dividends. Including this raise, GAP’s annualized dividend rate now stands at 66 cents per share, translating to an attractive yield of 2.9% based on the stock price as of Feb. 25, 2025.

Stocks that have a strong history of dividend payments and growth belong to mature companies, which are less susceptible to large swings in the market. Hence, this acts as a hedge against economic or political uncertainty as well as market volatility. At the same time, such companies offer protection with their consistent increase in payouts.

Such shareholder-friendly actions are crucial in attracting investors who prioritize consistent returns. Gap’s strategy of incremental dividend growth not only bolsters shareholder income but also reinforces investor confidence in its financial health and stability. As of Nov. 2, 2024, the company generated $870 million in cash from operating activities and had a free cash flow of $540 million. It had cash and equivalents of $2 billion as of the same date, which shows an increase of 42.9% from the prior-year period.

What Lies Ahead for GAP Stock?

This announcement precedes Gap’s upcoming fourth-quarter fiscal 2024 results, scheduled for release on March 6, after market close. Our proven model conclusively predicts an earnings beat for GAP this time around. The company has a Zacks Rank #3 (Hold) and an Earnings ESP of +11.55%. Our research shows that for stocks with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3, the chance of a positive earnings surprise is high. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.

However, the company is likely to witness top and bottom-lines decline, when it reports quarterly results. The Zacks Consensus Estimate for fourth-quarter fiscal 2024 revenues is pegged at $4.06 billion, indicating a drop of 5.5% from the prior-year quarter’s figure. The consensus mark for earnings has been stable over the past 30 days at 36 cents a share, down 26.5% year over year.

An uncertain macroeconomic environment, including inflationary pressures and other headwinds, remains a concern. Soft spending patterns on evolving consumer preferences and adverse foreign currency translations are other deterrents. Also, tough comparisons and weather-related headwinds are likely to hurt results. In addition, higher operating and selling, general and administrative expenses are likely to have hurt the company's profitability.

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Nevertheless, the company’s growth initiatives, coupled with immense strength in its brands and effective in-market execution, are anticipated to have somewhat offered a cushion to its performance in the quarter. It has been smoothly progressing on the reinvigoration of its brands. GAP is well on track with its cost-control efforts and disciplined inventory management. Shares of the company have gained 14.1% in the past three months compared with the industry’s 5.6% growth.

3 Retail Picks You Can’t Miss

We have highlighted three better-ranked stocks, namely Deckers DECK, Boot Barn BOOT and Urban Outfitters URBN.

Deckers, a footwear and accessories dealer, currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. 

The Zacks Consensus Estimate for Deckers’ current financial-year sales indicates growth of 15.6% from the year-ago figure. DECK delivered an average earnings surprise of 36.8% in the trailing four quarters.

Boot Barn, a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories, currently sports a Zacks Rank of 1. The company delivered a trailing four-quarter earnings surprise of 7.2%, on average. 

The Zacks Consensus Estimate for Boot Barn’s current financial-year sales indicates growth of 14.9% from the year-ago figure.

Urban Outfitters, a fashion lifestyle specialty retailer, currently sports a Zacks Rank of 2 (Buy). URBN delivered an average earnings surprise of 22.8% in the trailing four quarters.

The consensus estimate for Urban Outfitters’ current financial-year sales indicates growth of 5.6% from the year-ago figure.

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Deckers Outdoor Corporation (DECK) : Free Stock Analysis Report

Urban Outfitters, Inc. (URBN) : Free Stock Analysis Report

Boot Barn Holdings, Inc. (BOOT) : Free Stock Analysis Report

The Gap, Inc. (GAP) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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