Analyzing VFC’s Consistent and Growing Dividends to Shareholders



Dividend history

VF Corporation (VFC) consistently increased its dividends to shareholders. In fact, the company is a dividend aristocrat. This group includes companies that increased their DPS (dividend per share) for a period of at least 25 years.

VFC increased its dividends for 43 consecutive years. This isn’t a small feat! VFC’s DPS grew at a CAGR (compound annual growth rate) of 13.2% in the last five fiscal years. It grew by 21% in 2014. In its 3Q15 earnings release, VFC announced a quarterly dividend of $0.37 per share—up 16% compared to the previous quarter. This implies an annualized rate of $1.48.

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Dividend payout ratio

VFC paid out about 52.5% of its earnings through dividends in the trailing 12-month period. This compares to 27.5% for Nike (NKE), 37% for Gap (GPS), and 37.3% for Hanesbrands (HBI), respectively.

Dividend yield comparisons

VFC’s stock was trading at a forward dividend yield of 2.6% on February 10—compared to 1.2% for Nike, 3.3% for L Brands (LB), and 1.7% for Hanesbrands. The S&P 500 Index (SPY) (IVV) (VOO) and the S&P 500 Consumer Discretionary Sector Index (XLY) (FXD) (VCR) were yielding 2.6% and 1.9%, respectively.

Besides a higher dividend payout, part of the reason for VFC’s higher yield is the stock’s performance. It lost 24% of its value since the beginning of 2015 and 8.5% in 2016 year-to-date. The stock suffered due to the company’s lowered guidance.

In contrast, Nike’s stock rose by 19.4% since the beginning of 2015. The stock price performance only represents part of shareholders’ returns. A predictable dividend stream can provide some returns—and liquidity in the form of cash—to shareholders, even when share prices are falling.

VFC accounts for 0.87% of the holdings in the SPDR S&P Dividend ETF (SDY) and 0.49% of the holdings in the First Trust Value Line(R) Dividend Index Fund (FVD).

Share repurchases

VFC also tried to provide upside to earnings per share by repurchasing its own shares. It repurchased 10 million shares in the first nine months of 2015 at a total cost of ~$730 million. However, according to its stated goal, VFC’s management would look at attractive acquisition opportunities first before funding dividends and share buybacks. This factor could impact future share repurchases if more attractive investment opportunities come along.


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