Best Buy Should Favor Share Buybacks Over Dividends, Truist Says

02:42 PM EDT, 09/29/2026 (MT Newswires) -- Best Buy (BBY) should shift its capital allocation focus from dividends to share buybacks to capitalize on the electronics retailer's discounted valuation, Truist Securities said in a note Tuesday. The company's dividend has grown at a compounded annual rate of roughly 13% over the past decade to $3.84 per share, outpacing a 2.5% annualized increase in net income over the same period, according to the brokerage. "We think Best Buy should completely reset their capital allocation strategy," Truist Managing Director Scot Ciccarelli said. "We think the new (management team/board of directors) should seriously consider cutting their dividend and reinvesting their 'cash savings' into buybacks, given their high dividend payout rate and the discounted valuation of their equity." Best Buy in 2016 announced its intent to become a "premium dividend payer" with a targeted 35% to 45% payout ratio, initiating a 22% payout boost alongside a $0.45 special dividend. Growing dividend at the same pace as that of net income over the past decade would have saved $3.6 billion to fund share buybacks, while maintaining a dividend yield higher than the S&P 500's, Ciccarelli said. "The stock would likely come under short-term pressure because of the taboo around dividend reductions and selling from some equity income investor mandates," Ciccarelli said. "However, if those exact same funds were reallocated into buybacks, we strongly suspect that the selling pressure would dissipate quickly." Assuming the company wants to stick to its capital allocation strategy, it could issue debt to repurchase stock, Ciccarelli wrote. "Stock buybacks are accretive for Best Buy due to its modest valuation, even in today's higher interest rate environment," he said. The brokerage reiterated its buy rating on Best Buy's stock and kept the price target at $100. Shares of the company were down 1.1% intraday Tuesday but have gained 33% this year. In late August, Best Buy lifted its full-year outlook as its fiscal second-quarter results surpassed Wall Street's expectations. Retail giant Walmart (WMT) issued a soft earnings outlook for the ongoing three-month period last month after its fiscal second-quarter US comparable sales growth decelerated more than the Street's estimates. Also in August, Target (TGT) lifted its full-year outlook as tariff refunds helped double the retailer's fiscal second-quarter earnings year over year. Price: 89.19, Change: -0.72, Percent Change: -0.80