I've had CATO on my watch list since December and I started a position this month. My thinking is this is a well run, no debt company that has grown earnings for many years including through the deep recession. They have grown their dividend for 10 years at a rate of 10%/year and even though they didn't increase the dividend during the recession, they caught it up quickly. Continuing, I think since they prepaid the 2013 dividend along with the $1 extra, they are not screening well for dividend payers this year and that is cause for the stock price to drop around $3. And, since they had a bad quarter, this is good for another $3 drop down to where they are now. Another bad quarter might take them down to $20, but I think this company has a long history of running their business well and I expect they should recover to above $30 by mid-2014 and deliver a near 5% yield on todays cost at that time (maybe closer to 5.5% after a nice 2014 increase).
I have owned CATO for many years. Your assessment I think is fairly accurate. You are correct, in December they paid all the 2013 dividends ( $1.00 ) plus a special dividend of $1.00 per share. They recently raised there dividend to $1.20/yr. So for the remainder of 2013 expect a $0.20 dividend then in 2014 back to $1.20/yr. As I recall, but may be incorrect they borrowed money cheaply to pay the special dividend. Recently they have had some disappointing same store sales numbers but I personally relate this to the recession and weather possibly. Overall I am still holding my shares and considering adding to my position #$%$ allow.
If you are looking for crazy growth, CATO may not be for you. If you are looking for the dividend plus some growth this may be your type of stock. I own this in my IRA and in my case I am more about dividends with a reasonable payout ratio and this fits my goal.
Thanks for the affirmation. The dividend plus growth that betters inflation is what I am looking for, and I like balance sheets with minimal debt and intangibles. That same store sales report looked a little worse than expected, but seems to be built in to the price for now. I was thinking the 20% dividend increase might have indicated a better report, but more likely they just figured paying .05 of it is easily doable due to the dividend already prepaid in Dec.