Macy's Dividend Looks Stronger Than American Eagle's After Tariff Refunds Fade
Macy's and American Eagle both beat quarterly estimates and received IEEPA tariff refunds. Macy's adjusted earnings would still have topped consensus without its refund, while American Eagle's merchandise margins weakened and its shares fell. Macy's dividend is well covered and has risen for five straight years, but American Eagle's payout appears less secure.
Macy’s and American Eagle both reported quarterly results that exceeded expectations, aided by refunds tied to IEEPA tariffs. Macy’s adjusted profit would have beaten consensus even excluding its $98 million refund, helped by double-digit growth at Bloomingdale’s and gains at Bluemercury. American Eagle’s results included a $161 million refund, but its merchandise margins weakened by 330 basis points and its stock dropped about 13%.
Macy’s has lifted its dividend annually since 2021, reaching $0.1915 per quarter, and free cash flow covers the payout 5.4 times. American Eagle cut its dividend in 2023 and has since paid $0.125 per quarter, with a 14% inventory increase at cost posing markdown risk if holiday demand falters.
Income-focused investors, including retirees, could be affected if American Eagle’s payout proves less secure or Macy’s growth stalls. A dividend cut may reduce household cash flow, while weaker retail margins could influence store staffing, supplier orders, and holiday discounting. Shoppers and workers in communities tied to these chains may also feel ripple effects if consumer demand softens. The outcome remains uncertain and depends on holiday traffic and management decisions.