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VF Corp: Dividend Increase On The Horizon

Summary

VF Corp typically announces a dividend increase in October.

Annual increases have averaged over 20% for each of the previous three years.

Will earnings growth be enough to keep pace with historic dividend growth?

VF Corp (NYSE:VFC) is a perennial dividend aristocrat, having boosted its dividend annually for each of the last 42 years. The company typically announces an increase in October and is currently yielding 1.8% as of Monday's closing price of $71.56 per share. The dividend is currently at $0.32/share quarterly, or $1.28/share annually

With a portfolio of iconic brands such as The North Face®, Wrangler®, Vans®, and Nautica®, the company has a strong market presence and serious staying power. It's no secret that I'm a major supporter of this company. I wrote a comprehensive article two years ago outlining its strengths and opportunities. Since that time, the stock is up roughly 35% (from about $53 at the time I wrote the article to about $71 today), representing a CAGR of 15.7%. Including the dividends, the total return works out to be 17.6%

VF Corp stock is very well covered by the analyst community, of 24 opinions the current mean price target is $83.90, a 17.57% upside from current prices. Most recently, on October 8th, Canaccord Genuity reiterated its buy recommendation and increased its target price from $88 to $90, indicating a roughly 26% upside from Friday's closing price (not included in analysis below).

Source: Yahoo Finance

Estimating The Dividend Increase

There are a few ways we can estimate the next dividend increase, but it's all fuzzy math since VF Corp does not have a firm stance on maintaining a payout ratio or growth rate. Here are two ways we can look at the potential dividend:

  • Dividend growth rates: Apply these against past dividends using three- and five-year growth rates
  • Payout ratios: apply these against expected forward earnings using past ratios and payout ratio growth

Both of these methods are fairly straightforward, but none of them can truly estimate what's...


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