VF Corp.: A True Aristocrat

12/16/2016 8:00 am EST


Ian Wyatt

Publisher & Chief Investment Strategist, Wyatt Investment Research

True dividend aristocrats are few and far in between, and when we find one priced to yield 3% or more, we’re keen to recommend it, asserts Ian Wyatt, editor of High Yield Wealth.

We look for at least three decades of uninterrupted annual dividend growth, a history of annual dividend increases of 8% or higher on average, and a high likelihood the dividend streak will extend into the distant future

VF Corp. (VFC), the largest apparel company in the world with $12.4 billion in annual revenue, is a true dividend aristocrat. The firm has been around since 1899.

For the past 44 years, annual dividend growth has been the norm. The latest bit of growth occurs with the upcoming quarterly payment, a 13.5% increase that lifts the yield to over 3%. 

The company name may fail to ring a bell, but its brands should: Lee, Wrangler, Timberland, The North Face, JanSport, Nautica, and Vans all reside in VF Corp.’s portfolio.

VF Corp. has also expanded into world markets. U.S. domestic growth trundles along in the low-single digits. Developed and emerging markets generate mid-to-high-single-digit growth.

Meanwhile, e-commerce is VF Corp.’s fastest-growing direct-to-consumer channel. North Face, Timberland, and Vans reported 30% year-over-year increases in e-commerce sales this year.

VF Corp.’s willingness to adapt and repeatedly remake its business has kept revenue and EPS on an upward trajectory. EPS has increased at a 10% average annual rate over the past decade; dividends per share have risen at a 12% average annual rate. 

VF Corp. continually increases its dividend and continually buys back shares. At the end of 2016, the firm will have returned more than $5.5 billion of cash via share buybacks and dividends over the past five years.

Next year, VF Corp. should earn $3.40 to $3.45 per share – roughly 10% higher than what it earned this year. A share price between $65 and $70 is a reasonable target for the next 12 months.

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