Up to date on February twenty third, 2021 by Bob Ciura
Buyers in search of high-quality dividend progress shares can be sensible to look at the record of Dividend Aristocrats. These are firms within the S&P 500 Index, with 25+ consecutive years of dividend will increase. There are simply 65 such firms on this record.
The Dividend Aristocrats are among the many highest-quality dividend shares in the complete inventory market. For that motive, we’ve got compiled a listing of all 65 Dividend Aristocrats, together with vital metrics like dividend yields and price-to-earnings ratios.
You possibly can obtain a free copy of the Dividend Aristocrats by clicking on the hyperlink beneath:
V.F. Company (VFC) is on the record of Dividend Aristocrats, and has elevated its dividend for 48 years in a row. V.F. Corp will increase its dividend every year, together with 2020 which was a really troublesome yr for the corporate, and the broader financial system, because of the coronavirus pandemic.
However V.F. Corp has a recession-resistant enterprise, and the power to stay extremely worthwhile even throughout financial downturns. This offers it the power to proceed elevating its dividend every year, even when enterprise situations deteriorate.
V.F. Corp is a huge within the attire trade. The corporate’s annual gross sales exceed $10 billion, however the firm has humble beginnings. It began all the best way again in 1899, and has seen many twists and turns within the almost 120 years since.
The corporate was first began by John Barbey and a gaggle of buyers. Collectively, they created the Studying Glove and Mitten Manufacturing Firm. Throughout the 1960’s, the corporate adopted its present identify, V.F. Corp. It has a extremely numerous product portfolio, with many category-leading manufacturers.
In 2019 V.F. Corp separated its VF’s Jeanswear group, together with the Wrangler, Lee and Rock & Republic manufacturers. The separation was accomplished by way of a 100% distribution of shares to V.F. Corp shareholders, with the brand new entity named Kontoor Manufacturers buying and selling as an unbiased, publicly traded firm below the ticker KTB.
The present atmosphere is difficult for V.F. Corp, as a result of a troublesome retail local weather. Mall visitors is declining, which has damage brick-and-mortar retailers, lots of which carry V.F. Corp’s merchandise. If that weren’t unhealthy sufficient, the coronavirus pandemic of 2020 despatched the U.S. financial system right into a recession, which is a broadly destructive catalyst for attire.
These traits have weighed on V.F. Corp in latest intervals. In the newest quarter, income got here in at $3.0 billion, a -6% decline, pushed by retailer closures and decrease client demand because of the COVID-19 pandemic.
Supply: Investor Presentation
Working earnings equaled $412 million in comparison with $540 million beforehand, whereas adjusted earnings-per-share equaled $0.93 versus $1.15 prior. V.F. Corp additionally up to date its fiscal 2021 steering, anticipating adjusted earnings-per-share of roughly $1.30, up from “at the least $1.20” from earlier steering.
V.F. Corp had a troublesome yr in 2020, however it stays an trade chief with prime manufacturers. Assuming the worldwide financial system continues to get well in 2021, V.F. Corp ought to return to progress.
V.F. Corp has a number of avenues for future progress, which embody acquisitions, a renewed deal with core manufacturers, and progress by way of e-commerce. First, the corporate accomplished its $820 million buy of Williamson-Dickie Manufacturing Co in 2017. Work attire is one among V.F. Corp’s strongest performing companies proper now, because of Dickies. Actually, Dickies was the one 1 of the corporate’s large 4 manufacturers to submit optimistic currency-neutral gross sales progress in the newest quarter.
Second, V.F. Company accomplished its introduced spinoff of its Wrangler, Lee and outlet companies right into a separate firm referred to as Kontoor Manufacturers, Inc. (KTB) in 2019. Denims had been a really robust enterprise for V.F. Corp. Eradicating these under-performing manufacturers allowed V.F. Corp to deal with its core manufacturers.
Lastly, direct-to-consumer gross sales are an rising catalyst for V.F. Corp, particularly because the coronavirus pandemic solely accelerated the development towards on-line buying. Direct-to-consumer digital channel gross sales elevated 49% final quarter.
It took the corporate a while to regulate to altering behaviors in client spending, however V.F. Corp seems to have found out the best way to attain clients in an period of Web retail.
Aggressive Benefits & Recession Efficiency
There are a number of key aggressive benefits which have fueled V.F. Corp’s spectacular progress for therefore a few years. First, are its robust manufacturers–the corporate has a number of billion-dollar manufacturers that lead their respective classes. This offers the corporate pricing energy.
As well as, V.F. Corp advantages from working in a gentle trade. Most of the merchandise V.F. Corp sells—resembling workwear–haven’t modified a lot (if in any respect) prior to now 100 years.
These qualities assist V.F. Corp stay worthwhile, even throughout recessions. For instance, V.F. Corp stored on elevating its dividend by way of the Nice Recession, because of its constant profitability.
The corporate’s earnings throughout the Nice Recession are beneath:
- 2007 earnings-per-share of $1.35
- 2008 earnings-per-share of $1.39 (3% enhance)
- 2009 earnings-per-share of $1.29 (7% decline)
- 2010 earnings-per-share of $1.61 (25% enhance)
V.F. Corp skilled a gentle earnings decline in 2009, however returned to robust progress in 2010 and past. The corporate skilled a decline final yr because of the pandemic, however it remained extremely worthwhile which allowed it to boost its dividend.
Given its divestitures of weaker companies, robust core manufacturers and progress in digital channels, we really feel that V.F. Corp ought to be capable of keep this progress price going ahead.
Valuation & Anticipated Returns
After second quarter outcomes, V.F. Corp reaffirmed its steering for the fiscal yr. The corporate expects to earn $1.30 per share in fiscal 2021, which might be a big year-over-year decline of 51%. Nonetheless, for valuation functions we’re utilizing $2.40 in underlying earnings energy and a ten% annual progress price off this decreased base.
Buying and selling close to a value of ~$80, the anticipated EPS of $2.40 provides the inventory a price-to-earnings ratio of 33.3. We have now a goal P/E a number of of 19. If shares have been to revert to our goal common, then annual returns can be decreased by 10.6% over this time period.
Shares of V.F. Corp have a present dividend yield of two.5%. Given the brand new annualized dividend of $1.96, the payout ratio is 82% utilizing our base estimate of $2.40 in EPS. The corporate’s present payout ratio is elevated in opposition to its historic common, however the dividend payout stays protected barring one other giant decline in EPS within the upcoming fiscal yr.
Placing all of it collectively, a projection of anticipated five-year whole shareholder returns is beneath:
- 10% earnings-per-share progress
- -10.6% valuation reversion
- 2.5% dividend yield
We count on a complete annual return of 1.9% by way of 2026. This projection is a low price of return, primarily due to the excessive valuation of the inventory. From a dividend progress perspective, V.F. Corp. is a good inventory. It’s merely overvalued at the moment.
V.F. Corp has overcome a few of the short-term challenges that it confronted because of the decline of buying malls and the coronavirus pandemic. The corporate has acquired property that slot in effectively with its future plans, and divested these that don’t.
The corporate has additionally seen spectacular progress charges in its core manufacturers, significantly Dickies, in addition to within the areas of e-commerce. This has V.F. Corp in a robust place for the longer term.
That being stated, our projected whole annual return of 1.9% shouldn’t be engaging sufficient for us to advocate shopping for shares of V.F. Corp in the intervening time.
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