Dick’s and Best Buy Both Raise Their Dividends. Only One Easily Covers the Check
Both Dick's Sporting Goods and Best Buy just raised their dividends, but free cash flow tells a very different story about which payout a retirement portfolio can actually count on.
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Which retail dividend holds up better for a retirement-focused investor: Dick’s Sporting Goods (NYSE:DKS | DKS Price Prediction) or Best Buy (NYSE:BBY)? Best Buy has the stronger income profile, and the cash flow statements show why. Both raise their dividends, and both depend on discretionary spending in physical stores. Right now, only one of them pays its dividend easily out of free cash flow.
Dividend Income: Best Buy Pays More and Covers It Better
At $88.84, Best Buy’s $3.84 annualized dividend yields about 4.3%. Dick’s $5.00 annualized payout yields about 3.7% at $136.43.
Best Buy’s coverage is stronger. Best Buy produced $1.26B of free cash flow in its fiscal year ended January 2026, compared with $801M in dividends. That is roughly 157% coverage. Over the first half of fiscal 2027, operating cash flow minus capex came to about $952M, against $405M paid out.
The buffer at Dick’s is much thinner. Free cash flow of about $482M in the fiscal year ended January 2026 covered $414M of dividends by roughly 116%. Through the first half of 2026, free cash flow was about $49M against $225M in dividends. Management also guides full-year net capex to roughly $1.4 billion. The balance sheet can cover the shortfall for now, with $914 million in cash and no borrowings on a $2 billion credit facility.
Dick’s does have the stronger record of growing its payout. Its quarterly dividend rose from $0.3125 in 2020 to $1.25 today, and it paid a $5.9375 special distribution in September 2021. Best Buy’s latest raise was just 1%. Even so, a retiree is better served by a well-covered dividend that grows slowly than by fast raises that cash flow is not currently funding (the kind of coverage gap we highlighted among the seven warning signs in our free dividend traps guide).
Business Durability: Best Buy’s Momentum Beats Dick’s Foot Locker Drag
Best Buy has now beaten EPS estimates five quarters in a row. In the latest quarter, adjusted EPS was $1.47 against a $1.36 estimate, and comparable sales rose 4.1%. The company raised fiscal 2027 adjusted EPS guidance to $6.70 to $6.90. Ads and the online marketplace are adding higher-margin profit, with marketplace sales volume expectations raised to $1.3 billion. Electronics still face price swings and replacement cycles. Computing average selling prices rose by the mid-teens while unit sales fell by a high single-digit percentage, and management expects computing growth to slow. Jason Bonfig takes over as CEO on Nov. 1.
The core Dick’s chain is healthy, with comparable sales up 4.9%. Foot Locker is dragging results. That section posted a $31.9M operating loss, and Dick’s cut full-year EPS guidance to $11.00 to $12.00 from $13.50 to $14.50. Management said, “We’re going to experience some pain at least through the end of this year.”
Valuation: Dick’s Is the Cheaper Stock
Dick’s trades at about 12x the midpoint of its guidance, compared with roughly 13x for Best Buy. Measured against those same midpoints, its dividend uses only about 43% of earnings, versus 56% at Best Buy. Dick’s shares are down 29.59% year to date, while Best Buy is up 37.92%. Analysts’ average target for Dick’s is $158.27. Best Buy’s average target of $86.95 sits below its current price. Dick’s clearly wins on valuation.
Verdict: Best Buy Earns the Retirement Income Slot
For an investor who lives on dividend checks, Best Buy has the stronger profile. It offers the higher yield, free cash flow that covers the payout with room to spare, and guidance that is rising. Dick’s fits a longer total-return horizon that can handle the Foot Locker turnaround in exchange for the lower valuation.
What would flip the outcome: Foot Locker returning to a section profit while Dick’s capex comes down far enough that operating cash flow covers the dividend again. On Best Buy’s side, comparable sales turning negative as the computing cycle passes, or a new CEO scaling back shareholder returns, would restart the debate.
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
