Buckle Up for Value & Yield
10/20/2016 7:00 am EST
Our research shows that companies with high insider ownership often also have conservative financial structures, pro-shareholder dividend policies, prudent decision makers, and intelligent risk-reduction strategies, explains Ian Wyatt, growth and income expert and editor of High Yield Wealth.
When we find a company with such attributes priced at a discount, we roll up our sleeves and start analyzing.
Our interest was piqued by Buckle Inc. (BKE), which sells a mix of high-quality, on-trend apparel, accessories, and footwear targeted to young men and women through 470 retail outlets spread across 44 states.
Buckle’s board chairman, Daniel Hirschfeld, is the son of the company founder, and has considerable skin in the game. He owns 34% of Buckle’s outstanding shares.
Buckle has built a rock-solid capital foundation. The company carries no long-term debt and has no capital leases.
Buckle’s dividend yields a respectable 4.2% based on the $1-per-share dividend and the prevailing $24 share price.
Except Buckle’s shares don’t yield just 4.2%. Over the past 10 years, Buckle has regularly supplemented its regular dividend with a special dividend.
This year, investors actually received an 8.3% total dividend yield. In fact, since 2006, Buckle has distributed $22 per share in special dividends — over $1 billion in special dividends.
Now for the obvious question: If Buckle is such a generous cash cow, why is its share price down 35% over the past year?
Sales have trended lower over the past two years. This disconcerting trend conjures another obvious question: Is Buckle a value pick or a value trap?
We obviously think it’s a value pick. Due to its discounted share price, Buckle trades at less than 10 times next year’s EPS estimate of $2.50.
We’ll confess that we’re typically leery of fashion-driven retailers, especially those that cater to younger tastes.
But Buckle is the exception to the rule; it has endured and prospered through numerous fashion cycles, surviving for 68 years in a very fickle business.
By Ian Wyatt, Editor of High Yield Wealth