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Investors rarely get a chance to buy stocks with 9% dividend yields where the business is on the up. But this might be the case with B&M European Retail Value (LSE:BME) right now.
The company has fallen out of the FTSE 100 after a disappointing couple of years. But the latest signs are positive, so could this be a huge passive income opportunity?
What’s been going wrong?
In the 52 weeks leading up to March, B&M’s total revenues grew from 3.7% to £5.6bn. That doesn’t sound too bad, but there’s a lot more going on beneath the surface.
The trouble is, this was almost entirely the result of opening new stores. Adjusting for this, results were poor – especially in the UK, where sales fell 3.6%.
With the UK accounting for around 80% of total sales, that’s alarming. The headline number might not look too bad, but a dive into the details offers a much more worrying picture.
B&M does have ongoing plans to keep expanding its store count. But it won’t be able to do this forever – sooner or later, individual stores are going to have to start performing better.
Signs of a recovery
Despite this, the stock has climbed 30% from its 52-week lows. And a big reason for that was the company’s update for the three months leading up to the end of March.
During this period, B&M’s like-for-like UK sales fell 2.4%. That’s still not good (or anywhere near good) but the market reacted positively and it’s easy to see why.
Over the last three quarters, this metric has started moving in the right direction again. The previous report announced a 2.8% decline and the average for the year was a 3.1% drop.
There’s a long way to go, which is why the stock is still 40% lower than where it was at the start of 2024. But the slowing decline in like-for-like sales is undeniably a positive sign.
Dividends
A falling share price has pushed the dividend yield on B&M shares to some eye-catching levels. The headline is around 4.6%, which probably counts as interesting without being spectacular.
Again though, there’s more to the company than meets the eye. On top of its regular dividend B&M has also paid a special distribution each year since 2020.
That amount has fluctuated – and the weak recent performance meant it fell in 2025. But even accounting for this, it’s still about the same as the entire regular dividend for the year.
If this continues, investors who buy the stock today could get around 9% of their investment back in cash each year. And there aren’t many places offering that kind of return right now.
Is the worst over?
B&M shares are an interesting proposition right now. Back when like-for-like sales declines were accelerating, I thought that buying the stock was very risky.
The last 12 months have probably vindicated that view. And while there’s a risk things could deteriorate further, the signs are encouraging.
The stock might be 30% higher than its lows already, but if the company is through the worst, a 9% yield could be a great opportunity. I think it’s definitely one for dividend investors to consider.
