V.F. Corporation (VFC) designs and manufactures, or sources from independent contractors various apparel and footwear products primarily in the United States and Europe. This dividend champion has paid dividends since 1941, and has been able to boost them for 40 years in a row.
The company’s last dividend increase was in October 2012 when the Board of Directors approved a 20.80% increase to 87 cents/share. The company’s peer group includes Coach (COH), Ralph Lauren (RL) and PVH Corp (PVH).
Over the past decade this dividend growth stock has delivered an annualized total return of 18.70% to its shareholders.
The company has managed to deliver an 10.50% average increase in annual EPS since 2002. Analysts expect VF Corp to earn $9.54 per share in 2012 and $10.99 per share in 2013. In comparison, the company earned $7.98/share in 2011.
The company has transformed itself into a designer and marketer of casual lifestyle brands for the US population. The company focuses on its Outdoor & Action sports, Sportswear and Contemporary brands lifestyle businesses, as rhey are projected to reach 60% of sales by 2015. Increasingly, I see many people wearing jackets with the “North Face” logo, either at work or in the streets. In 2011, the company outlined in its strategy the goal to generate $5 billion in additional sales and $5 in additional earnings per share by 2015, from 2010 levels. Over the near term, profits are going to come from increase I profit margins as denim costs decrease. Another growth factor could be expansion into international markets, as well as strategic shifting of focus to more profitable brands. The company expects to grow international sales by 15%/year, until they reach 40% of total sales. The company has a history of making acquisitions work, as evidenced by Vans and North Face deals in the early 2000s. The deal for Timberland brand is expected to be accretive to earnings as well. The company delivers a quality product at an attractive price point for consumers.
Another factor that could contribute to revenue growth is increase in the direct to consumer channels of sales. This will be achieved by increasing number of retail stores in US and Internationally as well as through online sales.
The return on equity has decreased from 22% in 2002 to 12.50% by 2009. Since then, it has increased back up to 21.20% in 2011. I generally want to see at least a stable return on equity over time.
The annual dividend payment has increased by 10.90% per year over the past decade, which is lower than the growth in EPS.
An 11% growth in distributions translates into the dividend payment doubling every six and a half years on average. If we look at historical data, going as far back as 1988, one would notice that the company has actually managed to double distributions every eight years on average.
The dividend payout ratio has increased from 30% in 2002 to 57% in 2009, before decreasing to 33% by 2011. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
Currently VF Corp is attractively valued at 16.50 times earnings and has a sustainable distribution. However, given the low yield of 2.30%, I would consider initiating a position in the stock on dips below $140.
Full Disclosure: None
Relevant Articles:
- Why I am not worried about the Fiscal Cliff and Dividend Tax Increases
- A Record Week for Dividend Increases
- How long does it take to manage a dividend portfolio?
- Dividend Aristocrats List for 2012
Popular Posts
-
A famous saying goes that there are two things certain in this world: death and taxes. While I am pretty sure I can’t escape death, I know t...
-
The S&P Dividend Aristocrats index tracks companies in the S&P 500 that have increased dividends every year for at least 25 years...
-
The year 2022 was a good one for dividends. " Dividend payments continue at record levels. The strength of the increases has declined,...
-
Peter Lynch is probably one of the best-known stock pickers of our time and certainly among the most successful. He was portfolio manager of...
-
As part of my monitoring process, I review the list of dividend increases every week. I use this exercise to review existing holdings, and t...
-
I review the list of dividend increases every week, as part of my monitoring process. This exercise helps me review existing holdings, and a...
-
Today marks the 15th birthday of the Dividend Growth Investor blog. It is unreal that I have managed to keep this up for 15 years in a row. ...
-
As part of my monitoring process, I review the list of dividend increases every single week. This process helps me to identify patterns, and...
-
A dividend king is a company that has managed to increase dividends to shareholders for at least 50 years in a row. There are only 45 such ...
-
As part of my review process, I monitor the list of dividend increases every week. This exercise helps me monitor existing positions, but al...