Dillard’s (DDS): Assessing Valuation After Special Dividend and Fresh Analyst Attention

Dillard's (DDS) made headlines after announcing a substantial special dividend of $30 per share for its Class A and Class B stock, catching the attention of investors and analysts alike.

See our latest analysis for Dillard's.

The special dividend announcement follows a remarkable period for Dillard’s, with the stock’s share price rising 48.67% year-to-date and an impressive 57.02% total shareholder return over the last twelve months. Momentum has been building in recent weeks, helped by renewed analyst focus and another dividend affirmation. This has pushed Dillard’s three- and five-year total shareholder returns to industry-topping levels.

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With shares now trading well above some analyst price targets and several experts urging caution, investors must decide: is there still overlooked value in Dillard's, or is the market already factoring in all future growth?

Price-to-Earnings of 18x: Is it justified?

Dillard’s currently trades at a price-to-earnings (P/E) ratio of 18x, which is slightly below the broader US market average (18.7x) but well above its estimated "fair" P/E ratio of 13.9x. The gap between its last close at $670.06 and fair value suggests the stock may be running hot relative to what fundamentals alone might justify.

The price-to-earnings multiple measures how much investors are willing to pay for each dollar of reported earnings. In retail, and especially for established department stores, the P/E is an important signal of future expectations, profitability, and sentiment.

At 18x earnings, the market appears optimistic, possibly rewarding Dillard’s robust share price momentum and reliable dividend. However, valuation models indicate this optimism could be priced ahead of the company’s slower profit and revenue growth prospects. A significant gap remains compared to the "fair" multiple derived from financial regression benchmarks, and the market could revert toward this level if sentiment shifts.

Compared with the global Multiline Retail industry average of 20x and peer group average of 21.6x, Dillard's multiple still signals moderately better value. Crucially, however, the 18x P/E is meaningfully higher than the fair ratio of 13.9x, implying room for a correction if growth disappoints or the market’s narrative shifts.

Explore the SWS fair ratio for Dillard's

Result: Price-to-Earnings of 18x (ABOUT RIGHT)

However, slowing revenue growth and a recent contraction in net income could challenge the market’s optimism if these trends persist.

Find out about the key risks to this Dillard's narrative.

Another View: DCF Model Challenges Market Optimism

Taking a different approach, our DCF model puts Dillard’s fair value at $515.83, which is significantly below its last close of $670.06. This suggests the share price may be nearly 30% above what underlying cash flows support, raising questions about whether momentum or fundamentals are driving demand. Is the market overlooking risk, or could Dillard’s experience a valuation reset?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Dillard's for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 916 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Dillard's Narrative

If you have a different perspective or want to dig deeper into the numbers yourself, you can quickly build a personalized view in just a few minutes. Do it your way

A great starting point for your Dillard's research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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