This Clothing Company Pays A Giant Dividend

Unless you’ve been invested in cash or gold, 2022 is a year many investors will prefer to forget. That said, dividend growth investors have a predictable income making it harder to hit the panic sell button.

Dividend investing is a popular investment strategy among investors that seek income. The main appeal of dividend investing is that it can provide a steady stream of income, which can be helpful in retirement planning.

There are several reasons why dividend investing can be a good investment strategy. For example, if we consider companies on the Dividend Aristocrats list (S&P 500 listed companies that have grown their dividends for 25+ years), they often have strong fundamentals. In other words, they have predictable revenue and a growing EPS. And dividend growth investors appreciate companies on the Dividend Aristocrats list have a history of increasing their dividends, at least 25 years in a row. 

In this article, I’ll cover a clothing manufacturer that’s a dividend aristocrat and offers the highest yield on the list.

V.F. Corporation (VFC) 

V.F. Corporation (VFC) is a global apparel, footwear, and accessories company based in the United States. It was founded in 1899. The company is headquartered in Denver, Colorado, U.S., and has over 35,000 employees.

The company operates in more than 125 countries through ~1,300 retail stores. Today, V.F. Corp has 12 major brands under its banner:

• Vans - Offers action sportswear.
• The North Face - Sells high-quality outdoor apparel, footwear, and accessories.
• Timberland - Offers apparel and footwear for the outdoor lifestyle.
• Dickies - Offers mechanic uniforms, scrubs, and tactical clothing.
• Altra - Offers various types of running shoes. 
• Eastpak - Sells high-quality bags and luggage.
• Icebreaker - Provides natural sporting apparel.
• JanSport - Sells backpacks, luggage, and outdoor gear.
• Kipling - Sells ever-green backpacks, handbags, gifts, and many more.
• Napapijri - Offers luxurious outdoor apparel, footwear, and accessories.
• Smartwool - Sells apparel made out of Merino wool.
• Supreme - Offers premium stylish apparel and footwear.

Stockholder Information

Unfortunately, V.F. Corp’s stock price has taken a beating in 2022. YTD, the company’s shares trade 56.91% lower, underperforming the S&P500 -21.95% return over the same period. V.F. Corp’s results are a result of its last two quarters' earnings results. 

On July 28, 2022, the company released its financial results for the first quarter of 2023- ending July 2, 2022. VFC’s revenue was $2.3 billion, representing an increase of 3% compared to the previous year. Strong customer engagement with its outdoor, streetwear and sports brands was the driving force behind this increase.

That said, earnings per share (EPS) was $-0.14 per share. This was down 137% compared to that of the previous year. Additionally, in the company’s trailing twelve months, ending on June 30, 2022, diluted EPS was $2.57, a decrease of 0.77% compared to the previous year's.

At the same time, the company also announced its quarterly dividend of $0.50 per share, payable on September 20, 2022. VFC’s annual dividend is $2.00. V.F. Corp’s dividend yield is a whopping 6.39% at yesterday's closing price. And while I wouldn’t blame you for thinking that a 6+% dividend is risky, investors can take solace in the fact that the company’s payout ratio stands at just 66.12%.

V.F. Corp has increased its dividend yearly since 1974 - or 49 consecutive years. If history repeats itself, the December dividend will be increased. The company is also listed in the S&P 500 index and, as a result, is a company placed firmly on the coveted Dividend Aristocrats list.

With a stock price of $31.26 as of October 4, 2022, VFC has a market value of $12.3 billion and trades at a P/E ratio (ttm) of 10.43, which is lower than its peers. Compare that with its 52-week high of $78.91, and I think it’s safe to say the stock is likely undervalued.

Analyst Ratings

Analysts seem to agree as the mean target estimates come in at $41.62 - or about 33% higher than yesterday's close.

Final Thoughts

Clothing and fashion in general is something that’s not going away any time soon. The market for outdoor clothing and footwear has grown in response to the push for living healthier lifestyles. And while the apparel and footwear sector can be volatile, V.F. Corporation seems to be well suited to weather the current macroeconomic environment. 

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