The Three Factors Spurring Nike’s Shareholder Returns



Nike’s shareholder returns outpace benchmarks

Nike’s (NKE) stock has provided total returns of 27.7% over the past year. This is one of the highest returns in its peer group, beating the benchmark S&P 500’s (SPY) -1.4% and the Dow Jones Industrial Average’s (DIA) -2.3%. In contrast, the S&P 500 Consumer Discretionary Sector Index ETF (XLY) (FXD) (VCR) has returned 3.5%.[1. Returns computed through March 4, 2016] Most of the gains have come about through stock price appreciation.

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Dividend history

While Nike (NKE) hasn’t been the most prolific dividend payer in the industry due to its emphasis on growth investments, it’s been able to consistently raise its annual DPS (dividend per share) over the past several years. The company’s DPS has grown at a compound annual growth rate of 15.3% over the past five years. In fiscal 2015, Nike paid out a dividend of $0.54 per share, up 16.1% year-over-year.

Dividend payouts

Nike had a dividend payout ratio of 28.4% in fiscal 2015, in line with its targeted payout ratio of between 25% and 35% between fiscal 2016 and fiscal 2020. In contrast, dividend aristocrat (SDY) (NOBL) VF Corporation (VFC) saw a payout of 45.9% in 2015. Nike is currently providing a forward dividend yield of 1.1%, compared with 2.2% for VFC, 1.1% for Columbia Sportswear (COLM), and 1.3% for Wolverine World Wide (WWW).[1. As of March 14, 2016] Nike and VFC together constitute 2.8% of the portfolio holdings in the Vanguard Dividend Appreciation ETF (VIG).

Share repurchases

Nike has also been providing value to shareholders through its share repurchase program. In fiscal 1H16, Nike repurchased 22.1 million shares for a total of $1.2 billion. The average cost per share was $56.08. Nike’s shares were trading at $60.81 on March 14, 2016. Share buybacks could provide a further upside to Nike’s earnings per share.


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