Best Buy (BBY) is among the most popular retail companies in the U.S., valued at $19.6 billion by market cap. Over the past 10 years, Best Buy stock has returned 132% to shareholders. However, after adjusting for dividend reinvestments, cumulative returns are much higher at 265%.
With the retailer's quarterly results due out later this month, let’s see if this dividend stock can continue to deliver steady gains to investors following its fiscal Q3 of 2025 (ended in October) results.
What to Expect From Best Buy in Fiscal Q3
With more than 1,100 retail outlets, Best Buy primarily sells technology products in the U.S. and Canada. Its portfolio of products includes desktops, laptops, smartphones, networking products, tablets, smartwatches, speakers, headphones, and other smart home products. It also offers appliances such as dishwashers, refrigerators, blenders, coffee makers, ovens, and more.
BBY is expected to report Q3 earnings before the market opens on Tuesday, Nov. 26. Analysts tracking Best Buy expect it to report revenue of $9.64 billion on adjusted earnings of $1.30 per share. In the year-ago period, BBY posted revenue of $9.76 billion with earnings of $1.29 per share. So, while sales are forecast to fall by 1.7%, earnings might rise marginally year over year.
In fiscal Q2, Best Buy reported net sales of $9.29 billion, down from $9.58 billion in the year-ago period. Its comparable sales were down 2.3%, compared to a 6.2% decline last year. Notably, the drop in comparable sales was the narrowest since fiscal Q4 of 2022.
Best Buy's revenue increased from $43.6 billion in fiscal 2020 to $51.76 billion in fiscal 2022. Over the last three years, Best Buy has been wrestling with headwinds such as inflation, elevated interest rates, slower consumer spending, and a sluggish macro economy. Several discretionary merchandise retailers have struggled with soft consumer demand following a period of unusually high sales during the COVID-19 pandemic. In the last four quarters, sales at BBY have totaled $42.5 billion.
Is BBY Stock Undervalued?
Best Buy expects the replacement cycle of products purchased during the COVID-19 pandemic to kick in soon, which should drive demand higher. The company expects the launch of the new lineup of Apple's (AAPL) iPhones, iPads, and MacBooks to reaccelerate revenue growth in the next 12 months. In Q2, Best Buy reported comparable sales growth of 6% in its domestic tablet and computing segments, helping it offset declines in categories such as appliances and gaming.
Moreover, Best Buy observed that the number of customers choosing to trade in an old device for a new one has doubled, which is another indicator of the replacement cycle gaining pace.
Analysts expect sales to fall by 4.3% to $41.6 billion in fiscal 2025. They also estimate earnings per share to narrow to $6.28 in 2025 from $6.37 in 2024. However, sales are expected to rise by 2% in fiscal 2026, while earnings growth is forecast at 8%.
Priced at 13.4 times forward earnings, BBY stock is not expensive, given it also pays shareholders an annual yield of over 4%. Given its outstanding share count, Best Buy’s annual dividend expense is around $800 million. In the last 12 months, BBY has generated a free cash flow of $1.37 billion, indicating a payout ratio of 58%. In the last 20 years, Best Buy has increased its dividends at an annual rate of 13.7%, which is exceptional.
Out of the 23 analysts covering BBY stock, the average rating is a “moderate buy,” and the mean target price is $105.20, about 15% above current levels.
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