Buy Bebe Buy

Cramer added Bebe Stores, the women’s clothing chain, to his list of dividend-paying stocks to own in this recessionary environment.

Normally, investors don’t want to own retail when we’re headed into a downturn, but this $7.22 stock has no debt and $4 per share in cash. Also, Bebe offers a 2.8% dividend and recently announced a $30 million stock buyback worth 19% of the float.

That $4 per share in cash puts a floor under the stock, and the dividend is just the cushion – if not a trampoline – that investors need in this tough market. Worst-case scenario, Cramer said, is that Bebe drops to $4 and the yield increases to 5%. Investors could buy more at a cheaper price and enjoy the dividend.

There’s also the potential for a short squeeze here. Sixty-nine percent of the shares outstanding are owned by the chairman and founder and his former wife. So with such a small float, the shares actually traded, and 19% of it shorted as of Sept. 25, any piece of good news could send the bear scurrying to cover their bets. That would send the stock higher.

Be forewarned, though. Bebe has struggled as a company since 2007. Merchandising blunders, competition and a slowing economy have all played a part in shrinking the company’s same-store sales. In fact, the company’s reported six consecutive quarters of bad numbers. The one saving grace for Bebe has been its ability to keep inventory down, which is one way to survive a recession.

But as bad as things are at Bebe, Cramer thinks this is already baked into the stock. And the estimates have come down so far there’s actually the possibility that Bebe could beat earnings expectations for fiscal 2009. There’s also an international business here that’s growing.

So with the dividend, the cash, inventory under control, a buyback underway and the chance to beat earnings next year, Cramer said Bebe could be a stock worth owning.

Questions for Cramer?

Questions, comments, suggestions for the Mad Money website?