Could Dividends Be In The Future For Bed Bath & Beyond?

With its shares down more than 25 percent since January, Bed Bath & Beyond BBBY is mulling whether to take on debt to boost its share buyback program or even pay a dividend for the first time, an analyst suggested Tuesday.

The company announced a $2 billion expansion to its existing buyback program Monday and filed a mixed shelf registration with the Securities and Exchange Commission that includes an unspecified amount of debt securities.

Bath & Beyond has historically been among the most conservative of major retailers, paying no dividends and carrying almost no debt since its 1992 initial public offering.

Previous buyback programs have been financed exclusively by free cash flow. But its latest plan will be funded by "operating cash flow as well as various financing alternatives," the company said Monday.

Credit Suisse's Gary Balter thinks that "could foreshadow the issuance of debt to return value to shareholders," something the company has previously never done.

While the buyback may be good news to Wall Street, "[a] dividend would be even more well-received by investors," Balter said in a note Tuesday.

Balter recalled that in March, when Williams-Sonoma WSM raised its dividend by 41 percent, its shares rose 10 percent in a day.

Nike NKE in November increased its dividend by 17 percent, sending its shares up more than six percent in two days.

Balter said he doesn't know whether Bed Bath and Beyond will pay a dividend.

But there is "potential upside should the company choose to reverse its long-standing conservative balance sheet structure," Balter said. "We are near the bottom of underperformance" for the stock.

Balter has a Neutral rating with a $70 target. The company traded recently at $59.36, up 0.2 percent.