In 2020, nobody wanted to own retail stocks. Lockdowns had shut physical stores. E-commerce was supposedly going to destroy every bricks-and-mortar retailer. Kingfisher – the owner of B&Q in the UK and Castorama and Brico Depot across Europe – was being priced as if the home improvement business was structurally finished.
TVISIL’s high-dividend yield screen said otherwise. The result: +102% total return from the 2020 entry.
What Is Kingfisher?
Kingfisher plc (LSE: KGF) is one of Europe’s largest home improvement retailers, operating B&Q in the UK and Ireland, Castorama and Brico Depot in France and other European markets, and Screwfix in the UK. The business sells everything from paint and flooring to power tools and garden furniture – a large, established retail operation with significant property assets, strong brand recognition, and a customer base that tracks housing market activity and home renovation spending.
What the TVISIL Screen Found
Dividend yield at distressed levels on a non-distressed business: Kingfisher had cut its dividend in 2020 in line with most UK retailers. But even on reduced payout assumptions, the yield relative to the beaten-down share price was compelling. More importantly, the underlying business was generating cash – lockdowns had actually created a surge in DIY spending that directly benefited Kingfisher’s core categories.
Solid balance sheet and property asset backing: Kingfisher owned significant freehold and long-leasehold retail property, providing a floor on asset value that the market was largely ignoring while focused on near-term earnings uncertainty.
The narrative was worse than the fundamentals: The market was applying a generic ‘retail is dying’ discount to a business whose core category – home improvement – was actually seeing structural tailwinds from the shift to working from home and renewed focus on living spaces. TVISIL’s process separates price from narrative, and the price was clearly not reflecting what the fundamentals actually showed.
The Outcome
From the 2020 entry to exit: +102% total return as Kingfisher’s earnings recovered strongly, the dividend was reinstated and grew, and the market re-rated the stock away from its pandemic lows.
The Lesson
Kingfisher is a reminder that the biggest opportunities in dividend investing are not in stable, well-understood businesses paying steady yields. They are in sound businesses temporarily dislocated by events that the market is treating as permanent when they are actually temporary. TVISIL’s process is specifically designed to find those situations.
Follow the TVISIL process at www.valueinvestingsage.com/pricing. Plans from $20 trial to $549/year Diamond.
TVISIL is an educational model portfolio. Not personalised investment advice. All investing involves risk including permanent capital loss. Past performance does not guarantee future results.