Portfolio shares: Is Dunelm a good, cheap dividend stock?
I explain why FTSE 250 dividend stock Dunelm (LON:DNLM) is a member of my quality dividend model portfolio.
Homewares retailer Dunelm (LON: DNLM) has been a disappointing performer since I added it to my quality dividend model portfolio.
Shares in this business – which is still controlled by the founding Adderley family – are down by 36% from my entry price, but I'm not giving up yet.
Why are the shares falling? I think that Dunelm's share price slump probably reflects expectations of a post-pandemic sales slowdown. This isn't unreasonable. Dunelm traded very strongly through the pandemic, as demand for homewares surged.
Rather fortuitously, Dunelm had invested in ecommerce capabilities just before the pandemic. This left the group well-positioned to expand its online trading, which now accounts for around one-third of sales.
The remainder comes from its stores, which tend to be large-format units on retail parks. Again, this turned out to be the best type of shop to have when non-essential retailers reopened. Shoppers could drive to retail parks, avoiding public transport and cramped high-street units.
