Kohl’s vs. Macy’s: Which Struggling Retailer Can Still Afford Its Dividend?

Kohl’s (NYSE:KSS | KSS Price Prediction) or Macy’s (NYSE:M): which one should an investor planning for retirement own right now if the goal is a dividend that keeps arriving? Both retailers have cut before, both trade as turnaround stories, and both just raised full-year guidance. Judged on which payout is more likely to survive, Macy’s comes out ahead.

Retail Business: Macy’s Is Growing While Kohl’s Shrinks

Macy’s posted comparable sales growth of 2.7% in its latest quarter, led by Bloomingdale’s at +11.3% and Bluemercury at +6.2%. Management called it the company’s fifth consecutive quarter of comparable sales growth. Revenue of $5.059B beat the $4.80B consensus, with full-year comp guidance now at +1.0% to +1.5%.

Kohl’s moved the other way. Comparable sales fell 0.9% in Q2, store sales dropped 2%, and traffic was slightly down. Full-year guidance calls for comps flat to down 1.5%. Management summed up the problem directly: “We continue to see choiceful discretionary spending from our core low to middle income customer as they remain financially pressured.” The fix is reinvesting tariff refunds into opening-price-point proprietary brands, media and store payroll, while marketplace sales grew 88%. Winner: Macy’s.

Dividend Coverage: Kohl’s Cut Left It a Small Bill

Kohl’s pays $0.125 per quarter, or $0.50 annually, for a yield of 2.9%. Last fiscal year the dividend cost $56 million against free cash flow of $1.008B. Management expects free cash flow of roughly $600 million this year, tariff benefit included, and guides adjusted EPS to $1.80-$2.40. That range carries a tariff-refund boost of about 65 cents, so underlying earnings are lower than the headline.

Macy’s pays $0.1915 quarterly, an annualized forward $0.766 on a stock at $22.64. Dividends cost $197 million last year versus free cash flow of $797M, alongside $250 million of buybacks. Real estate offers a thin cushion: asset monetization proceeds fell to $35 million from $75 million. Winner: Kohl’s, purely on coverage, because the 2025 cut reduced the obligation to a fraction of cash flow.

Cut Risk: Liquidity and History Favor Macy’s

Kohl’s paid $0.5 per quarter through December 2024, then dropped to $0.125 starting in March 2025. It also fell from $0.704 in March 2020 to $0.25 in 2021 after a gap in payments. Cash reached $821 million with no ABL loans, but $360M of notes carry a 10.000% rate, and year-to-date interest expense hit $126 million. Management may hold extra cash to address debt when the non-call period comes up in 2027, so shareholder payouts compete with deleveraging. Analysts are cool: 2 Buy ratings against 3 Sells and 2 Strong Sells. Shares are down 10.05% year to date and 55.57% over five years.

Macy’s suspended its dividend after a $0.3775 payment in March 2020, restored it at $0.15 in 2021, and has moved it to $0.1824 in 2025 and $0.1915 in 2026. Cash stands at $1.294B, full-year interest expense should be roughly $90 million, and the stock is up 37.3% over the past year. Winner: Macy’s.

Verdict: Macy’s Owns the Safer Dividend

For an income-focused retiree, Macy’s is the dividend to research first. It pairs positive comps with more cash, cheaper debt and a payout that has grown since reinstatement. Kohl’s fits only a deep-value investor comfortable with a trailing P/E of 8, treating the small dividend as a bonus rather than a paycheck. (The seven warning signs that a big yield is about to be cut are the whole subject of our free dividend trap guide.)

What would change the call: a Macy’s third quarter worse than its guided loss of 19 to 23 cents per share, or comps turning negative. On the other side, Kohl’s would need positive comps and a refinancing of its 10% notes without draining cash.

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