Favorable market trends suggest that previously struggling stocks may recover, providing attractive share price appreciation, earnings growth, and dividend yields. Although many dividend stock choices exist, we prefer dividend growth stocks, especially ones with high growth rates. One I like here is Dick’s Sporting Goods (DKS), the largest sports and leisure retailer in America, says Prakash Kolli, editor of Dividend Power.
DKS operates 869 stores in 47 states, of which 725 are Dick’s Sporting Goods stores, and the remainder are specialty types. The company’s success has allowed it to capture around 8% of the market share, up from 7% in 2019. Dick’s sells large national brands like Nike, Yeti, Peloton, Wilson, Ping, The North Face, Wilson, and Brooks. It also has an assortment of private-label brands.
Total sales were over $12,368 million in the fiscal year 2022 and $12,705 million in the past twelve months. Like most specialty retailers, Dick’s grows its market share by adding more stores and more products within its stores. The company also gains in revenue and profit by selling more items per customer. Product volumes like sneakers, athletic wear, and sports equipment are climbing, and Dick’s offers a wide selection and decent pricing.
From a dividend growth perspective, the company is a current Dividend Challenger with a nine-year history of increases. The five-year growth rate is roughly 23.5% because Dick’s only commenced paying a dividend in 2013.
Rising earnings per share suggest more additions to come, mainly because the payout ratio is miniscule at around 16%. The low percentage indicates solid dividend safety supported by high-interest coverage of 20X and a moderate leverage ratio of 1.2X. Moreover, the dividend quality grade is an ‘A.’
Recommended Action: Buy DKS.
