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Should ISA investors buy this unloved FTSE 100 dividend stock and its 6.6% yield?

Marks & Spencer (LSE: MKS) may be the victim of the latest FTSE 100 reshuffle but, for the moment, it’s still clinging on by its fingernails. That’ll change in the next few weeks when the fashion giant falls into the FTSE 250, a chastening experience for a business that’s been a stalwart of Britain’s premier share index since its inception in 1984.

Did I say fashion giant? ‘Relic’ is perhaps more of an apt description for this once-loved shopping institution. A 34% share price slump since the start of May alone has prompted the retailer’s demotion and I’m tipping it to keep sliding as consumers continue giving its clothing lines the cold shoulder.

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Triple trouble

It’s not just that Marks & Spencer’s troubles are confined to claims its clothing is over-priced and off-trend. Though, of course, this continues to cause the company huge stress — latest financials showed like-for-like sales at its clothing and homewares division drop 1.6% in the 12 months to March.

It’s also not just that the company is struggling amid broader weakness in the UK retail sector, a problem that’s getting worse amid ongoing Brexit uncertainty. Most recent Office for National Statistics data disappointed and showed retail sales fall 0.2% in August.

It’s that the company’s management, after years of trying and countless aborted attempts, still hasn’t got a clue as to how to bring its flagging fashion arm back to life. Jill McDonald was poached from Halfords in 2017 to oversee a revolution, but brought very little to the party before she was dismissed in July.

Asleep at the wheel?

Even when M&S happened upon a popular product line, it wasn’t able to capitalise because of poor stock control. In the last fiscal year, the Footsie firm noted “encouraging progress in quarter three was constrained by weak availability in quarter four as we sold out of fast-selling lines and experienced supply issues.” And these issues will take some time to solve as well.

Chief executive Steve Rowe has vowed to take day-to-day control of the division which he headed before taking the top post three-and-a-half years ago. But those hoping it will prove to be a much-needed silver bullet for this flagging business are likely to be disappointed. He failed to institute significant change in his first stint at the unit, and market conditions have worsened since then as competition has increased and consumer spending has shrunk.

Meanwhile, the line of people leaving M&S continues to grow, the latest of which, chief financial officer Humphrey Singer, announced his exit on Friday. Speculation is now growing as to whether Rowe could be next to head for the exit.

Now Marks & Spencer’s cheap — it currently trades on a forward P/E ratio below 10 times — while it boasts a monster 6.6% corresponding dividend yield too. This is a reflection of the company’s high-risk profile, however, and the probability that earnings will keep skidding beyond the anticipated 17% drop City analysts have marked for fiscal 2020. I, for one, plan to keep avoiding the high street horror like the plague.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.